Next has warned it is facing a near £50m hit from the war in Iran, as rising transport and energy costs linked to Middle East disruption force the retailer to raise prices in some overseas markets.
The FTSE 100 fashion and homewares group said it now expects the conflict to cost £47m this financial year — up sharply from the £15m estimate given in March — and cautioned that disruption could persist until at least next January.
The update highlights the growing impact of geopolitical instability on global supply chains, with Next pointing to higher shipping costs, increased fuel prices and rising energy bills as key pressures feeding through into its operations.
The company said it plans to increase prices by up to 8pc in some international markets from May to offset higher costs, while also pursuing operational efficiencies.
However, it stressed that UK and European prices are expected to remain broadly stable, with no increase beyond the 0.6pc already forecast at the start of the year.
“Based on our current estimates, we do not anticipate increasing our UK prices over and above the 0.6pc we had forecast,” the group said.
Chief executive Lord Simon Wolfson said the company would continue to monitor the situation closely, warning that pricing could be adjusted further if disruption worsens.
“We plan to mitigate the ongoing cost increases caused by the conflict in the Middle East with a combination of moderate price increases in some international territories and operational cost savings,” he said.
Despite cost headwinds, Next upgraded its full-year profit guidance to £1.22bn, up from the £1.21bn previously forecast, citing stronger-than-expected trading in the first quarter.
Full-price sales rose 6.2pc in the period to May 2, driven by solid performance across its UK business and resilient demand in core product ranges.
UK sales increased 4.4pc over the three months, although growth slowed sharply through the quarter, easing to 1.7pc by the end of the period. The group expects further moderation to around 1pc in the second quarter, as it faces tougher year-on-year comparisons.
Next said the conflict in the Middle East is increasingly feeding through into logistics costs, particularly international shipping and domestic distribution, as fuel prices rise.
Higher energy costs are also adding pressure across the supply chain, although the company said some of these impacts are being offset by better-than-expected factory pricing in the UK.
The update underscores how even relatively domestically focused retailers are being drawn into global cost shocks, with geopolitical tensions increasingly shaping pricing decisions and profit margins.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Next had previously assumed three months of disruption in the Middle East, which would have added an additional £15 million in costs.
“But with no clear end to the conflict in sight, oil and freight prices are expected to remain elevated for some time, and cost guidance has been upgraded.
“While some caution is wise, Next has developed a track record of under-promising and over-delivering in recent years.
“A leader in the UK market, it’s better placed than many UK retail peers to navigate a tougher backdrop.”
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