Next boss Simon Wolfson issues Iran war price warning and says the Treasury must not “end up profiting” from the conflict through bigger tax take
Shoppers face a jump in clothing prices this autumn if the Middle East crisis drags on, the boss of fashion giant Next has warned.
Simon Wolfson said the impact of the war on the cost of oil already risked leading to some price rises by the summer. But the big hit would, if the conflict continues, come later in the year because of rising energy costs for manufacturers in Asia and elsewhere around the world.
Lord Wolfson, who is a Tory peer, warned Next’s prices could increase by around 1% or 2% by around June to cover its own increased costs of transport and energy. But he added: “If we begin to see prices translate through to manufacturing costs – which if the conflict persist they definitely will – then the goods that we are contracting for now, which will begin to come into shops in September and October, that is when you will begin to see more significant increases in prices. My guess is that it will be less than 10% and more than 4%. We don’t yet know.” He added that other fashion companies were likely to be facing similar cost pressures when it came to manufacturing.
Next is currently working on the basis that the war lasts for three months.
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It came as the company revealed it had already taken a £15million cost hit from the conflict. The retailer said it had set aside the cash for additional costs for fuel and air freight due to shipping disruption and soaring oil prices. It added the impact so far can be offset by savings elsewhere in the business.
Next cautioned the conflict in the Middle East – a region which accounts for around 6% of its annual sales – was holding back growth in those countries, and is also likely to impact costs, selling prices and consumer demand across the wider group.
The threat came as Next reported better-than-expected annual profits, up 14.5% at £1.16billion.
Despite the risk of higher costs, the company upped its profit guidance for the year ahead to £1.21billion, though this is based on the Iran war being resolved before the summer.
Lord Wolfson also hinted that the government should not pocket any higher tax take from soaring fuel prices. The Treasury is set to net more in fuel duty and VAT as a result of higher petrol and diesel prices.
“A reasonable ask for our industry is that government doesn’t end up profiting from it and that where we have taxes that are a percentage of the fuel prices, the Treasury takes what it was expecting and not necessarily more,” he said. “A very reasonable ask of government would be, don’t actually make more money out of this than you were expecting.”
