Shoppers may see a rise in clothing prices this fall if the ongoing Middle East crisis persists, according to the CEO of popular fashion retailer Next. Simon Wolfson highlighted that escalating oil prices due to the conflict could already lead to some price hikes by summer. However, the significant impact on clothing prices could be felt later in the year as energy costs for manufacturers in Asia and other global regions increase.
Lord Wolfson, a member of the Conservative Party, suggested that Next might need to raise prices by 1% to 2% by June to cover rising transportation and energy expenses. He cautioned that if the conflict prolongs, manufacturing costs would likely escalate, resulting in more substantial price increases for goods arriving in stores by September and October. He estimated a potential price increase between 4% and 10%, emphasizing the uncertainty surrounding the situation. He also noted that other fashion brands could face similar challenges in production costs.
Next is currently planning based on a three-month duration for the war. The company disclosed a £15 million cost impact from the conflict, earmarked for additional expenses related to fuel and air freight due to disruptions in shipping and surging oil prices. Despite these challenges, Next indicated that it could offset the current impact through savings in other areas of its operations.
The ongoing conflict in the Middle East, which accounts for approximately 6% of Next’s annual sales, is hindering growth in those markets and is expected to influence costs, selling prices, and consumer demand across the broader company portfolio.
While reporting a better-than-expected 14.5% increase in annual profits to £1.16 billion, Next raised its profit forecast for the upcoming year to £1.21 billion, contingent on the resolution of the Iran conflict before summer.
Lord Wolfson also suggested that the government should not profit excessively from the higher fuel prices through increased tax revenue. He emphasized the importance of the Treasury sticking to its expected tax intake without overburdening consumers and businesses.
This perspective was shared as part of Next’s financial update, which included the company’s stance on industry taxation and its outlook for navigating the current economic challenges.
