Next has said that clothing prices could rise by up to 10% for autumn 11 and that businesses must adapt to a fundamentally changed retail landscape dominated by inflation and lower consumer expenditure.
The retail giant, which said pre-tax profits rose 9% to £551m in the year ended January 2011, said that it expected clothing prices to be between 8% and 10% higher for autumn 11 due to continuing wage inflation in the Far East and increasing commodity prices. It follows an increase in prices of 8% for spring 11.
Supply chain and buying
Next said it was working to offset inflationary pressures and had found cheaper sources of supply and continued to place larger orders to get better prices.
Stock shortage problems in the latter half of 2010, including a lack of bestselling product in womenswear, have been resolved by working with new suppliers and buying in more depth and breadth of colours, Next added.
Next chief executive Lord Wolfson said that Next would contain overall price rises to between 8% and 10% in the second half of the year and predicted some easing in inflationary pressures if cotton supplies increased as the year progressed.
He said “things are likely to get worse before they get better” in the coming year but that the retailer was well-placed for the environment.
Wolfson: UK retail will be ‘different’
He added: “Retail in the UK is going to be different over the next few years. The consumer environment is likely to be dominated by the challenges of global inflation, public sector cuts and limited growth in consumer credit.
“These factors mean that retailers cannot plan for never-ending growth in like-for-like sales that many have enjoyed over the last 15 years.”
He said that the retail industry must “think differently about how we manage and grow our businesses” with “new avenues of growth, innovative ways to control costs and careful management of the healthy cash flows” coming to the fore.
Retail like-for-likes drop 4%
Total group sales at Next were ahead 1% to £3.46bn during the year. Retail sales dropped 2.3% to £2.22bn, a like-for-like drop of 4%. Pre-tax profits were £328.8m.
Directory sales rose 7.1% to £935.5m. Pre-tax profits at the Directory arm were £221.9m
Sales at young fashion brand and chain Lipsy rose by 61% during the year to £45m with a trading profit of £3.4m. Next will open 20 Lipsy stores and grow sales through wholesale, retail and online. Next wants sales to increase sales by 25% and trading profit by 50%.