Next chief executive Lord Wolfson says that its prices are likely to fall this year thanks to falling factory prices, despite the Suez Canal crisis and rising staff costs.
Although the crisis in the Red Sea has resulted in shipping times for Next’s goods being extended by 7-10 days and its staff costs are forecast to rise by £60million due wage inflation, he said that shoppers are likely to see a “small reduction” in prices at the tills over the next 10 months.
“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 currently down two percent, and we expect deflation of 0.5 percent in the second half,” he explained. “Higher freight costs have been factored into our prices going forwards but we still anticipate that our prices will fall.”
Wolfson added that shoppers are likely to see falling prices even though Next plans to increase its profit margins by 0.4 percent, in order to recover around £17million of its anticipated rise in staff costs.
Next recorded pre-tax profits of £908million for the 12 months to the end of January, up 4.4 percenton the prior year, while its revenues rose 9.1 percent to £5.5billion. It declared a final dividend of 141p per share, a payout worth more than £179million to its shareholders.
After unveiling Next’s record results, Wolfson said that he was more optimistic about the outlook for consumer spending than he has been in years, despite “significant uncertainties” such as the weakening employment market and the end of low fixed rate mortgages squeezing the finances of home owners.
Aside from wages rising and the expected fall in its prices supporting consumer demand, he said that Next has its cost base under control and new avenues of growth, such as Cath Kidston, Made and other brands it has acquired, and its overseas expansion.
As a result, Next forecasts sales growth of 2.5 percent for its 2024/25 financial year and its profits rising to £960million.
Richard Hunter, head of markets at Interactive Investor, said: “Next has shown its edge again in an environment in which it is seen as something of a bellwether.“
