Next has warned it faces a cost blow of nearly £50 million from the conflict in the Middle East and is set to increase prices in some overseas markets by as much as 8% to counteract the impact.
The fashion and homewares retailer has revised its estimated cost of the Middle East conflict upwards to £47 million, from the £15 million forecast provided in March, as it now anticipates disruption continuing for the remainder of its financial year through to next January.
The company said it would look to raise prices in international markets from May, but confirmed that cost-saving measures would mean it would not need to impose additional price hikes in the UK and Europe.
Next said: "We plan to mitigate the ongoing cost increases caused by the conflict in the Middle East with a combination of moderate price increases in some international territories and operational cost savings."
"Based on our current estimates, we do not anticipate increasing our UK prices over and above the 0.6% we had forecast at the beginning of the year."
However, the group cautioned that it may need to revisit its pricing strategy should the disruption and associated costs worsen.
The update came as Leicester-based Next nudged its full-year profit guidance up to £1.22 billion, from the £1.21 billion previously forecast in March, buoyed by a stronger-than-expected 6.2% rise in full price sales during its first quarter to 2nd May. UK sales increased by 4.4% over the three-month period, though growth moderated to 1.7% by the quarter's end and is expected to ease further to 1% in the second quarter as it faces challenging year-on-year comparisons.
The group stated that the Iran conflict was driving up transport costs for its goods, affecting both international shipping and UK distribution due to soaring fuel prices, while also experiencing rising energy costs.
In the UK, it is able to mitigate these costs thanks to better-than-anticipated factory prices.
