Next warns over clothes price surge

NEXT warned yesterday that its clothes prices would rise by around eight per cent in the new year as worldwide cotton prices soar.

The group, which runs over 500 stores in Britain and Ireland as well as the Directory home shopping business, said it expected fourth-quarter total sales growth to be lower than the third quarter’s 2.2 per cent increase but maintained its guidance for the year to the end of January 2011 profit. Next said sales at shops open at least a year fell 3.3 per cent in the third quarter to 30 October.

But that was offset by Directory sales growth of 7.9 per cent, which compared with forecasts of a rise of five to eight per cent and a second-quarter increase of 11.8 per cent.

Chief executive Simon Wolfson said: “We’re planning very conservatively for 2011 but not [for] a disaster.

He warned that due to further rises in the price of cotton, retail price increases were likely to be at the top end of Next’s previously stated five to eight per cent range for the first quarter of 2011. Higher rises could follow in the second quarter.

“Because we’ve bought most of the stock for the first-quarter of next year we can be fairly confident that our number at the top end of that range is right,” said Wolfson, who has just returned from a visit to factories in Bangladesh and India.

“We still haven’t contracted for the second quarter and if cotton prices continue to go up then that may nudge that [range] up.

“The price of cotton seems to be moving very rapidly and somewhat irrationally and it’s very difficult to make a call.”

Next said it was sticking with its forecast for underlying retail sales to fall by 1.5-4.5 per cent in its second half, with Directory sales up four to eight per cent.