Next to Hike Prices Up to 8% Outside Europe Amid Iran War Costs

British retail giant Next has announced plans to implement price hikes of up to 8% in select international markets outside of Europe. This strategic move comes as the company braces for a significant increase in operational costs, estimated at £47 million for the current year. These additional expenses are directly attributed to the escalating fuel prices and the ongoing disruptions to global supply chains exacerbated by the conflict in the Middle East.

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Next said its UK sales were better than expected at the start of the year.

While Next is signaling price increases in certain overseas territories, the company has assured its domestic customers that price hikes in the UK and Europe will be mitigated. This is achievable through a combination of internal cost-saving measures and improved factory-gate pricing. The retailer's forecast for full-year profit has consequently been revised upwards to £1.22 billion, reflecting better-than-anticipated full-price sales growth of 6.2% in its first quarter, with UK sales showing a robust 4.4% increase.

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The retailer said it is facing an additional £47m in costs this year due to higher fuel prices and disruption to global supply chains from the Middle East conflict.

Initially, Next had projected a more modest £15 million in additional costs related to the conflict, a figure that only accounted for the initial three months following the escalation of hostilities. The revised £47 million estimate underscores the evolving and potentially prolonged impact of the geopolitical situation on global commerce. The company's forecast assumes current fuel cost levels and no further deterioration or improvement in supply chain conditions.

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It said it would look to hike prices in some international countries from May, but said efforts to make cost savings would mean it does not need to push through extra price increases in the UK and Europe.

From a UK perspective, Next's announcement highlights the interconnectedness of global events and their tangible impact on consumer prices. While the company is adept at managing costs domestically, the need to pass on increased expenses internationally demonstrates the ripple effect of geopolitical instability. The fact that UK and European prices will remain largely unaffected, thanks to internal efficiencies, is a testament to Next's operational resilience, though the situation for consumers in other regions will undoubtedly be more challenging.

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Next increased its full-year profit forecast to £1.22bn, from £1.21bn, after full-price sales increased over its first quarter by 6.2%.