Shoppers may see an increase in clothing prices during the upcoming autumn season if the Middle East crisis prolongs, according to the CEO of fashion retailer Next. Simon Wolfson expressed concerns that the ongoing war’s impact on oil prices could lead to price hikes as early as summer. However, the more significant escalation in prices is anticipated later in the year due to rising energy expenses for manufacturers globally.
Lord Wolfson, a Conservative peer, mentioned that Next might raise prices by 1% to 2% by June to cover heightened transportation and energy costs. He suggested that if manufacturing costs rise due to the prolonged conflict, prices of goods arriving in stores around September and October could witness a more substantial increase, likely between 4% and 10%. He also noted that other fashion companies are likely to face similar challenges in manufacturing.
Next is currently operating under the assumption that the war will last three months. The company has already incurred a £15 million cost from the conflict, setting aside funds for increased fuel and air freight expenses due to disrupted shipping and soaring oil prices. Despite the impact, Next believes it can offset these costs with savings in other areas of the business.
The Middle East conflict is hindering growth in countries that account for about 6% of Next’s annual sales and is expected to affect costs, selling prices, and consumer demand across the broader group. Despite these challenges, Next reported a 14.5% increase in annual profits to £1.16 billion, exceeding expectations. The company raised its profit forecast for the upcoming year to £1.21 billion, contingent on the resolution of the Iran war before summer.
Lord Wolfson also suggested that the government should not benefit from increased tax revenue resulting from higher fuel prices. He emphasized the importance of the Treasury sticking to its expected tax intake rather than profiting further from the situation, especially concerning taxes linked to fuel price percentages.