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Next eyes ‘small reduction’ in prices ahead as cost of goods ease

Next, the clothing to homewares retailer, is anticipating a “small reduction” in selling prices this year due to falls in the cost of goods.

The company said it was anticipating some relief for hard-pressed shoppers despite a £60m hit from rising wage bills.

It made the prediction while revealing a 5% rise in pre-tax profits over the 12 months to the end of January to £918m.

Ordinary dividend payments of £258m were proposed, along with a £288m share buyback.

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Next maintained its profit predictions for 2024/25, seeing a rise just below 5%.

The company said the trading environment remained uncertain due to the cost of living squeeze on family budgets from the impact of high interest rates to tackle the pace of price growth in the economy.

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But it still anticipated full price sales growth of 2.5% this year.

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“On the face of it, the consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties,” Next said.

The group said it did not currently anticipate any material adverse impact from stock delays due to disruption to shipments through the Suez Canal.

It said that while shipments were being delayed by up to 10 days, they were being effectively managed.

Garments on coat hangers are pictured at a store of clothing retailer Next, in London, Britain, November 17, 2021. Picture taken November 17, 2021. REUTERS/May James
Image: Next said stock delays were not hurting its bottom line. Pic: Reuters

The Office for National Statistics (ONS) has signalled the UK is yet to see any price inflation arising from the Red Sea issue.

It had been feared that additional sailing time for cargo vessels, forcing up carriers’ fuel bills and wages, would have added to costs on UK shelves by now.

Next’s guidance on its own prices will come as a welcome relief to shoppers as it places pressure on rivals to keep pace.

Retail, like most sectors of the economy, have passed on higher costs since the end of the COVID crisis, with the situation exacerbated by Russia’s invasion of Ukraine that forced energy bills into unprecedented territory.

Other complaints include business rates.

Next shares rose by 2% at the market open.

Charlie Huggins, portfolio manager at Wealth Club, said of the performance: “This is another excellent set of results from Next, with sales and profits both progressing, in a year characterised by deep economic uncertainty and rising inflation.

“With inflationary pressures easing and fears of a hard economic landing receding, Next can look forward to the year ahead with confidence.”

Sky News Source