UK's Next to offset Iran war costs with price rises overseas
Next's Strategy to Manage War-Related Costs and Sales Performance
By James Davey
LONDON, May 6 (Reuters) - British clothing retailer Next said on Wednesday it would mitigate cost increases linked to the Iran war with modest price rises in some overseas markets and savings elsewhere, as it posted better-than-expected first-quarter sales.
European fashion retailers, including H&M, have warned that a prolonged Middle East conflict will push up prices and dent consumer demand.
Cost Increases and International Price Adjustments
Next said it would offset an estimated 27 million pounds ($37 million) of extra costs in its international business - mainly higher air freight and local distribution expenses - with price increases of up to 8% in markets outside Europe from May.
No Need for Price Increases in Europe
NO NEED FOR PRICE INCREASES IN EUROPE
In Europe, currency gains have absorbed cost pressures, meaning no price rises are needed, the retailer said.
Offsetting UK War-Related Costs
An estimated 20 million pounds in additional war-related costs in the UK will be offset by savings elsewhere and margin gains from better-than-expected factory gate prices.
Next said it does not expect to increase UK prices beyond the 0.6% it forecast at the start of the year.
Assumptions Underpinning Pricing Guidance
Its pricing guidance assumes that fuel costs remain at or around current levels and that disruption in factories and global transport networks neither worsens or improves.
Sales Performance and Financial Outlook
Full-price sales in the first quarter to May 2 rose 6.2%, beating guidance for a 4% increase, which Next attributed to exceptionally strong growth in the first five weeks of the period, before the Iran war began.
UK and International Sales Breakdown
First quarter UK sales rose 4.4%, while international sales rose 12.8%. Sales in the Middle East make up about 6% of annual turnover.
Profit Guidance and Market Reaction
Next edged up its guidance for 2026/27 profit before tax to 1.218 billion pounds, from 1.210 billion pounds previously and compared with 1.158 billion pounds in 2025/26.
It forecast full‑price sales growth of 5.0% for the full year.
Next shares were up 0.5% in early trading.
Analyst Commentary
"While the market is familiar with profit upgrades from Next, this one stands out given ongoing sales and cost pressures stemming from the Middle East conflict," PanmureLiberum analysts said.
($1 = 0.7359 pounds)
(Reporting by James Davey. Editing by Sarah Young and Mark Potter)
