Shoppers may face higher clothing prices this fall if the ongoing Middle East crisis persists, according to the CEO of fashion powerhouse Next. Simon Wolfson expressed concerns that the impact of the conflict on oil prices could result in some price increases as early as summer. However, the most significant impact is expected later in the year due to escalating energy expenses for manufacturers in Asia and other global regions.
Lord Wolfson, a Conservative peer, forewarned that Next could potentially raise prices by 1% to 2% by June to offset the heightened costs of transportation and energy. Should manufacturing costs continue to rise due to the prolonged conflict, which is highly likely, the company anticipates more substantial price hikes for products arriving in stores between September and October. Wolfson estimated the increase could fall between 4% and 10%, emphasizing the uncertainty of the situation. He noted that other fashion retailers are likely to confront similar cost challenges related to production.
Next’s current projection is based on a three-month duration for the war. The company disclosed a £15 million financial impact from the conflict, attributing it to additional expenses for fuel and air freight caused by shipping disruptions and soaring oil prices. However, Next believes it can offset this impact through cost-saving measures in other areas of the business.
The ongoing Middle East conflict, which accounts for about 6% of Next’s annual sales, not only hampers growth in those markets but also poses potential threats to costs, selling prices, and consumer demand across the broader business.
Despite the looming cost pressures, Next reported a 14.5% increase in annual profits, reaching £1.16 billion. The company raised its profit guidance for the coming year to £1.21 billion, contingent on the resolution of the Iran conflict before summer.
Lord Wolfson also suggested that the government refrain from profiting excessively from surging fuel prices through heightened tax revenues. As fuel duty and VAT revenues are expected to rise with increasing petrol and diesel prices, Wolfson urged the Treasury to stick to its anticipated tax revenue rather than collecting more than necessary. He emphasized the need for a fair approach from the government, ensuring that additional taxes are not burdening consumers unnecessarily.
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