Next warns of price rise in 2017

Fashion retailer Next has said it has not yet experienced any side effects in the wake of the recent Brexit referendum, but warned prices could rise in 2017 due to the sterling‘s depreciation.

While it was not yet certain if the UK‘s decision to leave the EU was affecting consumer spending, in its second quarter report covering the 26 weeks to July 30 Next said it expected profits to drop this year because of a “tough” environment.

The high street stalwart‘s new profits prediction is now between £775 million to £845 million before tax in 2016 – or between a 5.6 per cent drop and a 2.9 per cent increase.

Next – often regarded as the bellwether for the economic health of the UK high street – said it was fully-hedged against movements in currency for the rest of the year. However, overall prices could increase by an average of five per cent in 2017 if the sterling stays at its current level.

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“With only a few weeks since the EU referendum it would be unwise to draw any firm conclusions of the effect the decision to leave the EU will have on UK consumer demand,” Next said in statement today.

“So far, we can see no clear evidence of any appreciable effect on consumer behaviour, apart from the first few days after the vote.”

“Although it is very early in the buying cycle, we currently estimate that cost prices in 2017/18 will rise by less than five per cent on like-for-like products.

Next added it experienced a deterioration in “consumer demand for clothing” since October 2015 thanks to unseasonable weather, but hoped cold winter would boost its full-year earnings due to high demand for coats, hats and gloves.

Total sales at Next in the second quarter are up 0.3 per cent, an improvement on the 0.2 per cent dip it reported in the previous first quarter.

Meanwhile, sales in physical stores fell 3.3 per cent while directory sales grew 5.7 per cent.

Next shares dropped by 21 per cent immediately after the EU referendum.

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