Iran war costs Next £47m and may drive up prices
Retail giant Next has said the ongoing disruption caused by the Iran War has hit it with a £47m increase in costs from climbing energy and transport prices.
The FTSE 100 retail and homeware company said that the £27m increase, a sharp rise from it’s previous forecast of £15m, relates mainly to spikes in energy costs from overseas to the UK for transporting goods, including for inbound freight.
Next warned that it plans to implement “moderate” price increases for customers in some overseas countries to offset the costs, which will be effective in May.
The retailer said it will increase prices in places outside of Europe which will “vary by country” but be no more than 8 per cent anywhere, whilst prices for customers within Europe will not change as it offset costs here with financial gains.
This morning Next’s shares peaked at 12,905p after raising it’s full year profit guidance to £1.22 billion, despite the hit from the Middle East conflict, down nearly 5 per cent since the start of the year.
Next’s previous forecast only covered the first three months of the war and the company said the “ongoing disruption” sees a sharp jump in increased costs for the remainder of the year, assuming that fuel costs remain at their current levels and transport interruptions do not worsen.
In March, the company warned that additional shipping and energy costs caused by the conflict in the Middle East meant it may have to raise costs for customers if the conflict continues.
The retailer said despite the knock-on effects from the Iran war causing costs to spike, its full sale prices were up 6.2 per cent compared to last year, £28m ahead of what it had forecast.
Next said this “overachievement in sales” was because of “exceptionally strong growth in the first five weeks of the year”.
This follows the high street giant at the start of the year stepping in to buy shoe company Russell and Bromley in a line of recent acquisitions, seeing it take on three of it’s stores in Chelsea, Mayfair, and the Bluewater Shopping Centre.
“Next is a well‑oiled machine – despite conservative assumptions on Iran, forecasts have still ticked up. This is predicated on making cost savings and passing on some increase in prices, particularly in the Middle East which is an important component of its international operations,” AJ Bell investment director Russ Mould said.