Wolfson expects Next prices to drop despite extra costs
LORD Wolfson says Next’s prices are likely to fall this year even with the Red Sea shipping crisis and rising staff costs.
Houthi militia attacks close to the entrance to the Suez Canal have caused freight times for the chain’s goods to be extended by seven to 10 days.
And the wage bill is forecast to go up by £60million due to inflation.
But the fashion and homeware giant’s chief executive said shoppers are likely to see a “small reduction” in prices at the tills over the next 10 months.
Lord Wolfson said: “Selling-price inflation in our own products has reversed, mainly as a result of decreasing factory gate prices. Selling prices on like-for-like goods are down
2%, and we expect deflation of 0.5% in the second half.
“Higher freight costs have been factored into our prices going forwards but we still anticipate that our prices will fall.”
Lord Wolfson’s predicted price fall comes as Next increases its profit margins by 0.4% to recover around £17million of the anticipated rise in staff costs. Next had record pre-tax profits of £908million for the 12 months to the end of January – a year-on-year rise of 4.4%. Revenues rose 9.1% to £5.5billion.
It declared a final dividend of 141p per share, a payout worth more than £179million.
Lord Wolfson said he was more optimistic about the outlook for consumer spending than he has been in years, despite “significant uncertainties” such as the weakening job market and the end of low fixedrate mortgages squeezing homeowners.
He said Next has its cost base under control plus new avenues of growth.
These include Cath Kidston, Made and other brands it has acquired as well as the chain’s overseas expansion.
Next forecasts that its sales will grow 2.5% in its 2024-25 financial year with profits rising to £960million.
Richard Hunter, at Interactive Investor, said: “Next has shown its edge again in an environment in which it is seen as something of a bellwether.”