Next to hike prices as its costs increase

NEXT yesterday reported a slowdown in consumer spending and said the rising costs of materials and VAT would force a hike in the price of its goods.

The retailer said factors such as rising cotton prices and the VAT jump to 20 per cent from January would mean the customer being hit in the pocket.

Next said: “We have yet to purchase the majority of our spring-summer ranges but we estimate that selling prices may rise between five per cent and eight per cent.”

Meanwhile the company, which runs over 500 stores in Britain and Ireland, said first-half sales at shops open at least a year fell 1.5 per cent.

However, sales at its Directory home shopping business climbed 7.8 per cent in a lift for the company which was hit in the recession.

Gross profit margins increased in the first half and full-year profit will be between six to 11 per cent higher than the previous year at £535m to £560m, according to Next’s forecasts.

But it said there had been a marked tailing off in consumer demand. “We believe that consumer spending will be more restrained in the second half than in the first, as spending cuts and tax rises begin to take effect,” it said.

Next is budgeting for like-for-like retail sales to be between 1.5 per cent and 4.5 per cent lower in the second half of the year.