Next warns of price rises and staff shortages in Christmas run-up: reaction
High street giant Next has become the latest firm to warn over rising prices and workforce shortages in the run-up to the crucial Christmas trading period.
The fashion chain hiked its full-year outlook after strong summer sales but warned that supply chain woes had seen higher freight costs push up prices by about 2 per cent in the first half. It cautioned that this would continue into next year, with prices set to rise about 2.5 per cent in the first half of 2022.
Next added that it was also seeing some areas of the business come under pressure from staff shortages, particularly in logistics and warehousing, which may affect its delivery service going into the critical festive season.
The firm called on the UK government to take action on the lorry driver crisis and wider skills shortages.
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It said: "We anticipate that, without some relaxation of immigration rules, we are likely to experience some degradation in our service in the run-up to Christmas."
Chief executive Lord Simon Wolfson said the group may have to bring forward the next day delivery cut-off from 11pm, but stressed deliveries "won't grind to a halt".
The group reported pre-tax profits of £346.7 million for the six months to the end of July, down 16.5 per cent on a year ago but up 5.9 per cent on 2019 levels, after full-price brand sales jumped 62 per cent year-on-year and were 8.8 per cent higher versus 2019.
Next increased its full-year sales and profit forecasts for the fourth time this financial year after a "materially" better-than-expected performance over June and July.
Full-price sales jumped 20 per cent against 2019 levels in the last eight weeks of the first half, while it said the second half had also got off to a strong start.
The group now expects sales to rise 10 per cent on 2019 levels and pre-tax profits to reach £800m for the year to January, up 6.9 per cent on 2019 and above previous guidance of £764m.
But the firm warned: “The cost of living, along with the potential effect of seasonal labour shortages on our delivery service, may moderate demand in the months ahead.
“The HGV crisis was foreseen and widely predicted for many months. For the sake of the wider UK economy, we hope that the government will take a more decisive approach to the looming skills crisis in warehouses, restaurants, hotels, care homes and many seasonal industries.
"A demand-led approach to ensuring the country has the skills it needs is now vital."
Richard Hunter, head of markets at Interactive Investor, said: “Inevitably, Next is at pains to point out that challenges remain.
“The longer term issue of whether heightened pandemic online sales are here to stay is as yet unknown.
“The wider issue of cost inflation could also impact margins, while the group is also experiencing the difficulties arising from supply chain blockages in terms of stock, with staff shortages running into the peak season also a possibility.”
He added: “Next is a tightly run ship which is able to respond to a fluid trading environment both in terms of evolving fashion trends as well as financial challenges.”