LONDON, March 26 (Reuters) - British clothing retailer Next reported a 14.5% rise in annual profit on Thursday, edged up its guidance for profit in its new financial year and kept its guidance for
Retailer Next warns of demand hit and higher prices if Iran war persists
Next's Financial Outlook and Impact of Iran War
By James Davey
Cost Pressures and Price Increases
LONDON, March 26 (Reuters) - British clothing retailer Next warned on Thursday that the Iran war is set to drive up costs and weaken consumer demand, and said it may need to raise prices in June if the conflict persists.
Next said it had factored in 15 million pounds ($20 million) of extra costs likely to arise from the war, such as fuel and air freight, assuming three months of disruption.
It said these costs had been offset by savings elsewhere and did not affect guidance for its new financial year.
Potential for Higher Pricing
"Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing – but for today that remains a contingency not a plan," Next said.
CEO Simon Wolfson told Reuters that any price increase in June or July would be "in the order of 1% to 2% maximum."
Long-term Risks
"The real risk is later when you start to see (the impact of the war) in the price of manufactured goods. Then the price increases could be not 1% or 2% but 5% to 10%," he said.
Financial Performance and Guidance
For the year to January 31, Next reported a slightly better-than-expected 14.5% rise in pretax profit to 1.158 billion pounds, with full price sales up 10.9%.
It nudged up its guidance for 2026/27 profit to 1.210 billion pounds, but kept its forecast for full price sales growth to slow to 4.5%.
Shares in Next were up 6%.
Regional Sales and Consumer Confidence
Sales Trends in the UK and Middle East
Wolfson said the group had not seen a noticeable drop in UK sales since the war began, though sales in the Middle East, which makes up about 6% of annual turnover, had initially fallen "dramatically" and remain "suppressed".
Broader Retail and Consumer Sentiment
British retail sales tumbled this month by the most since April 2020, a Confederation of British Industry survey showed on Tuesday. A separate British Retail Consortium survey published on Thursday showed UK consumer confidence collapsed in March.
Wolfson's Perspective on Consumer Behavior
Referring to the UK, Wolfson said "our experience has been that generally people only tighten their belts when prices actually go up or taxes actually go up rather than in anticipation of it."
He said actual spending data was a better measure of confidence than any psychological gauge.
"How often do you say 'I'm not going to buy a shirt because I'm worried about the war in Iran'?" Wolfson asked.
Additional Information
($1 = 0.7482 pounds)
(Reporting by James Davey. Editing by Paul Sandle and Mark Potter)
