Fashion retailer NEXT raises prices to cover increase in costs

High Street giant Next said they are raising prices as they seek to offset higher wage and manufacturing costs. Next, which reported strong sales over Christmas, said its prices would increase by up to 6%.

Next said that prices for its spring and summer clothing and homeware ranges would rise by 3.7% from a year earlier, while it expects a 6% increase for autumn and winter goods.

It said sales for the three months to 25 December were up 20% compared with pre-pandemic 2019, boosted by a strong revival in “formal and occasionwear”.

Next’s online business saw sales soar by 45% from two years ago, whereas sales at its High Street stores were down 5.4%.

Next also upped its profit forecast for the year. It now expects to make an extra £22m, taking annual profits to £822m, which would be nearly 10% higher than in 2019.

The company is forecasting sales of full-price goods to rise by 7% overall in 2022, but it warned that this year could see a tougher trading environment, given the financial pressures facing households, such as higher energy bills.

Next also said it was facing higher costs itself, hence the need to increase its prices by more than previously expected.

The company said it had seen higher shipping and manufacturing costs. Wage costs were also climbing as a result of the increase in the National Living Wage and because of staff shortages in some areas, “most notably in warehousing and technology”.

Next is the first of the big retailers to tell us its Christmas story. And it’s had a strong one. The business had been expecting weaker growth, but it was much better than expected, adding an extra £70m of sales helped by a revival in adult formal and “occasionwear”. And this was despite lower levels of stock.

Online sales were up 45%, which more than offset falling sales in its stores. Even before the pandemic, more than half of the group’s sales were already online, making it well placed to benefit from the huge shift in shopping habits.

This performance puts Next firmly in the winner’s camp. It says forecasting the year ahead is unusually difficult. With soaring fuel bills and a rise in the cost of living, the big question is, how much discretionary spending consumers will be able to make?

It’s having to put up prices on products, too. But this is a retailer that’s better placed than most to cope with the cocktail of cost increases and challenges facing retailers this year.

Analysts praised Next for its performance, with the retailer also announcing a special dividend of 160p a share.

Next is the first major retailer to report on how it performed over the key Christmas trading period, with others to follow.

Source: BBCB