Retail giant Next has announced that the ongoing disruption caused by the Iran war has resulted in a £47 million increase in costs, driven by climbing energy and transport prices. The FTSE 100 retail and homeware company stated that the £27 million rise, a sharp increase from its previous forecast of £15 million, is primarily related to spikes in energy costs for transporting goods from overseas to the UK, including inbound freight.
Price Increases for Customers
Next warned that it plans to implement “moderate” price increases for customers in some overseas countries to offset these costs, effective from May. The retailer said it will raise prices in places outside of Europe, with increases “varying by country” but capped at 8 percent anywhere. Prices for customers within Europe will remain unchanged, as Next offsets costs there with financial gains.
Impact on Shares and Profit Guidance
Despite the financial hit from the Middle East conflict, Next’s shares peaked at 12,905 pence on Wednesday after the company raised its full-year profit guidance to £1.22 billion. However, shares are down nearly 5 percent since the start of the year. Next’s previous forecast only covered the first three months of the war, and the company noted that the “ongoing disruption” has led to a sharp jump in increased costs for the remainder of the year, assuming fuel costs remain at current levels and transport interruptions do not worsen.
In March, the company had already warned that additional shipping and energy costs from the conflict might force it to raise prices if the situation continued. Despite these challenges, Next reported that its full sale prices were up 6.2 percent compared to last year, £28 million ahead of its forecast. The retailer attributed this “overachievement in sales” to “exceptionally strong growth in the first five weeks of the year.”
Recent Acquisitions
This news follows Next’s recent acquisition of shoe company Russell and Bromley at the start of the year, which saw the high street giant take over three of its stores in Chelsea, Mayfair, and the Bluewater Shopping Centre.
