Clothing prices are expected to rise this fall if the conflict in the Middle East persists, according to the CEO of Next, a prominent fashion retailer. Simon Wolfson expressed concerns about potential price hikes due to the impact of the ongoing war on oil costs, foreseeing increased expenses for manufacturers worldwide, particularly in Asia.
Lord Wolfson disclosed that Next might raise prices by 1% to 2% by June to cover escalated transportation and energy expenses. However, he emphasized that if manufacturing costs increase due to the prolonged conflict, significant price hikes could be seen in products arriving in stores in September and October, likely ranging between 4% and 10%. The uncertainty of these cost impacts also extends to other fashion companies.
Next’s current planning assumes a three-month duration for the war, with the company already absorbing a £15 million financial impact from the conflict. This provision accounts for elevated fuel and air freight expenses caused by disruptions in shipping and soaring oil prices, which can be mitigated by cost-saving measures elsewhere in the business.
The conflict in the Middle East, affecting about 6% of Next’s annual sales, is hindering growth in the region and is poised to influence costs, selling prices, and consumer demand company-wide. Despite these challenges, Next reported a 14.5% increase in annual profits to £1.16 billion, surpassing expectations.
While anticipating potential cost escalations, Next revised its profit forecast for the upcoming year to £1.21 billion, contingent on a resolution to the Iran conflict before summer. Lord Wolfson also suggested that the government should refrain from profiting excessively from heightened fuel prices, proposing that any additional tax revenue resulting from increased fuel costs should not exceed the expected amount.
The company’s stance aligns with its industry peers, advocating for fair taxation policies amid economic uncertainties.