Next boss warns war in the Middle East could push up prices this year
The boss of Next has warned the war in the Middle East could push up prices for UK shoppers.
Lord Simon Wolfson said the conflict is ‘likely to have knock-on effects on costs, selling prices and consumer demand’ outside of the region.
It comes as the business said it had 'not yet reached the period of unusually strong UK trading we experienced last year,’ when the firm surpassed a £1billion profits milestone for the first time.
And Wolfson said it ‘may continue to restrain growth’ in the Middle East, which makes up 6 per cent of its total turnover.
The war will cost the retailer £15million in extra costs - including fuel and air freight - should it last for three months.
Next is seen as one of Britain's most reliable retailers even despite pressure on the High Street
But the business has saved costs elsewhere to offset these increases, so it does not impact its annual profit targets.
Chris Beauchamp, chief market analyst at IG: 'Today's figures from Next contain a hint that the rise in fuel costs is bound to extend beyond increases at the pumps.
'After a strong start to the year, Next and other retailers are facing tougher times, just like UK consumers.'
The remarks follow the boss of Morrisons yesterday, warning that consumers are facing 'tough times' amid predictions that food prices will rise in the coming months.
Shares rose 6 per cent on Thursday morning after it posted strong sales for last year.
The business expects profits to rise 4.5 per cent to £1.21billion for the current financial year, with sales set to rise 4.5 per cent too.
Lord Wolfson, whose insights into the UK’s economic health are closely watched, has steered Next since 2001. In that time, sales have soared, even as consumer confidence has struggled.
Profits surpassed expectations at £1.2billion for the 52 weeks to the end of January this year - 14.5 per cent up on the year before.
This was £8million higher than it had previously forecast, as full-price sales did better than expected in January while there were also ‘improved clearance rates’ at its end-of-season sales.
Annual sales rose 10.8 per cent to £7billion for the year.
In January, Next warned that 'continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses.'
It is one of the retailers to flag concerns over an upcoming package of employment law changes, including a proposal to offer staff a set number of guaranteed hours.
Lord Wolfson has said this must still allow retailers to hire part-time and seasonal workers to help them in busier times of the year and with recruiting students.
Retailers have also been grappling with higher costs over the past two years.
Next said that increases to the National Minimum Wage and National Insurance contributions, which came in last April, has meant the cost of its part-time entry level wages has risen 13 per cent.
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