Next blames clothes price rises on Budget wage costs
Next announced it would raise the price of some clothing to offset “normal increases of up to £73m” in staff wages and taxes.
The high street retailer said costs would increase due to measures announced in the Autumn Budget, including an increase in national insurance contributions for employers and an increase in the national living wage.
Next Prices are expected to rise by 1%, below the current inflation rate.
British Chambers of Commerce Business Group says more than half of companies plan to increase prices over the next three months to help cope with higher costs say this week.
Next said the price rise – which will offset around £13m of wage and tax costs – was “unwelcome”.
The company is part of a large group of retailers including Tesco, Amazon and Greggs. November letter to chancellor Rachel Reeves Warnings Labor budget measures will lead to rising prices and job losses.
The Office for Budget Responsibility, an independent forecaster, said last year that the majority of increases in employer national insurance contributions would be passed on by employers Workers are squeezed by rising wages and rising prices.
But at the time, Reeves said she “decided the right thing to do was to ask our country’s businesses and the wealthiest people to pay a little more.”
Next expects profits to rise 3.6% next year to more than £1 billion.
Labor claims it inherited a £22bn “black hole” from the previous Conservative government.
In their final months in power, the Conservatives cut workers’ National Insurance benefits by a total of 4%, costing them around £20 billion.
Reeves announced in her budget that employers’ national insurance contributions will increase from 13.8% to 15% from April this year.
She also confirmed that the national living wage will increase from £11.44 to £12.21 an hour from April.
The next price increase will only be for certain garments.
The company also said shoppers continue to change where they spend their money. Instead of buying cheap items, they are opting for mid- to high-priced items.
“To be clear, consumers will not necessarily spend more overall, but they will buy fewer items and prices will rise slightly,” the company said in a Christmas trading update.
“We believe this trend will continue into next year.”
The retailer also said it expected sales growth in the UK to slow as increases in national insurance filter through to the wider economy.
Retail Economics chief executive Richard Lim said “high street conditions are challenging”.
He said retailers had seen “successive waves of disruption” and rising costs would “really squeeze margins”.
Next up is the first major retailer to provide an update on Christmas deals, ahead of the likes of Tesco, Sainsbury’s and Marks & Spencer later in the week.
Next said sales rose 6% in the nine weeks to December 28, but online transactions exceeded those in stores.
Next said UK online sales rose 6.1%, but the company’s physical store sales fell 2.1%.
