Next chief executive Lord Simon Wolfson has warned its retail prices may increase by up to 5% next year as currency headwinds following the Brexit vote hit the high street.
The retailer, which announced a 1.5% drop in pre-tax profit to £342.1m in the half year to July this morning, will not be affected by the pound’s devaluation until spring 17.
Wolfson said in a “worst case scenario” prices would go up by 5% next year as the retailer passed on some of the costs to consumers.
“We’re still working on our supplier capabilities so it really is a worst case scenario. You have to take the pain somewhere. We’re under no illusion that if prices go up that will reduce our cash sales but I would rather take the hit on the top line so we don’t undermine the profitability of the business,” he added.
Next has developed relationships with new suppliers in Burma and Cambodia in a bid to mitigate costs. It has also broadened the capabilities of suppliers in Bangladesh and improved the efficiency of its suppliers in China and India.
Wolfson said it was too early to predict how trade would be in the run up to Christmas and into 2017, but said the Brexit vote was yet to have an effect on consumer spending.
“There’s no evidence of increased volatility after the vote. The market was difficult before [the vote], but I don’t think anyone will be put off buying a new blouse because we might be leaving the European Union in two years.”
He added: “if it gets to the stage that wages and employment are effected it might have an impact but the main driver of consumer spending is what’s in their pockets this month.”