Next, a prominent High Street retailer, has announced that its planned price increases for 2023 will be lower than previously expected. The company now anticipates a 7% price hike for the spring and summer, followed by a 3% increase in the autumn and winter, both lower than the figures it projected in January.
The retailer cited declining shipping costs and improved supplier rates as reasons for the smaller price hikes. This update coincided with the announcement of Next’s 5.7% growth in pre-tax profits, reaching £870.4 million for the year ending in January.
Additionally, Next plans to acquire the Cath Kidston fashion brand for £8.5 million, although it will not be purchasing the brand’s physical stores. With around 500 stores and an online presence, Next is often viewed as a bellwether for the British High Street’s performance.
In 2022, the retailer had already raised its prices due to increased production costs and a weaker pound. Initially, it had forecasted further price increases of 8% in spring and summer, and 6% in autumn for 2023. However, Next CEO Simon Wolfson now believes that the UK will be “past peak inflation” by the end of the year.
Despite the positive results, Next anticipates a challenging 2023 with declining sales and profits due to persistently high energy and wage costs. Other businesses, including Aldi, Lidl, Greggs, Marks & Spencer, and Dunelm, have also announced price increases.
The Bank of England projects that overall inflation will drop to below 3% by the end of the year as energy and food costs decrease. However, inflation unexpectedly rose to 10.4% in the year to February, up from 10.1% in January. Since December 2021, the Bank of England has increased interest rates 11 times in an effort to curb rising prices.
Governor Andrew Bailey has urged businesses not to raise prices faster than inflation, as it would exacerbate the cost of living. Lord Wolfson, while not directly addressing Bailey’s comments, indicated that Next would pass on any reductions in inflation to consumers through its pricing, aiming to maintain long-term competitiveness.
