Retailer Next has warned it expects its prices to shoot up at a faster pace than anticipated as retailers grapple the effects of surging inflation, exacerbated by the Russian invasion of Ukraine.
The fashion to homeware chain, which trades from 500 stores and online, also used the publication of its full year results to January to say it was expecting an £85m hit to sales in its current financial year as a result of its decision to halt sales in both Russia and Ukraine.
It said that a weaker outlook globally was a factor too behind the new guidance – offsetting strength in its core UK market.
Next forecast full price sales growth of 5% and a pre-tax profit of £850m for 2022/23 – the latter down by £10m on a January estimate.
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It reported profits of £823m for the last financial year – a 10% rise on the pre-pandemic year of 2019/20.
The company’s improved UK outlook was based, Next said, on a low jobless rate and strong consumer earnings despite the Office for Budget Responsibility warning on Wednesday that the country faced the largest drop in living standards since the 1950s as a result of surging inflation.
Next revealed in its statement that it was not immune from the rising cost pressures, which have accelerated in the wake of war in Europe and are only expected to intensify as the year progresses.
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“Inflation in Next’s selling prices in the first half is forecast to be +3.7%”, the company said, adding: “In the second half this figure is now forecast to be 8% (6.5% fashion and 13% on Home); this is 2% higher than our January estimate.”
But it admitted: “It would be wrong for Next to imply that it had any special insight into how all these uncertainties will translate into sales growth for the group.
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“Our central guidance represents our best guess, based partly on our assessment of the economy but also on our instinct and the evidence we have from our sales so far this year.”
Its outlook for the UK was aided by a better than expected start to the current year for store sales with a sharp reversal of lockdown fashion trends seeing a return to more formal dresswear and a reduction in spending on home and very casual clothing.
