Shoppers may face an increase in clothing prices in the upcoming autumn if the Middle East crisis prolongs, according to the CEO of renowned fashion retailer Next. Simon Wolfson highlighted that the ongoing war’s impact on oil costs could result in some price hikes by summer. However, the more significant impact is expected later in the year due to escalating energy expenses for manufacturers globally, particularly in Asia.
Lord Wolfson, a Tory peer, indicated that Next might raise prices by 1% to 2% by June to cover heightened transportation and energy costs. He expressed concerns that if manufacturing costs rise due to the prolonged conflict, prices could increase significantly when new goods reach stores in September and October, potentially by less than 10% or more than 4%. He noted that other fashion companies are likely to encounter similar cost pressures in production.
Next is currently operating under the assumption that the conflict will last for three months. The company disclosed a £15 million cost impact from the crisis, attributing it to additional expenses for fuel and air freight caused by shipping disruptions and soaring oil prices. Despite this, Next mentioned that the current impact could be mitigated by savings in other areas of the business.
The conflict in the Middle East, constituting about 6% of Next’s annual sales, is hindering growth in those regions and is expected to affect costs, selling prices, and consumer demand across the broader company. Despite the potential for increased costs, Next reported better-than-expected annual profits, soaring by 14.5% to £1.16 billion.
While increasing profit guidance for the upcoming year to £1.21 billion, contingent on the resolution of the Iran war before summer, Lord Wolfson suggested that the government should not benefit from higher tax revenues resulting from surging fuel prices. He emphasized that the Treasury should stick to its anticipated tax revenues from fuel prices rather than profiting excessively.
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