Retail firms have warned that prices could soar if the war in the Middle East continues beyond the short term.
British retailer Next said clothing prices could rise by 4% to 10% if the conflict continues beyond September, as factories are hit by higher fuel and fabric costs.
The company has accounted for £15 million (US$20 million) of additional costs due to the conflict, assuming the disruptions last three months.
It also said prices could rise by around 1% from June or July, as the disruption dragged on until then.
Increased costs didn’t affect guidance as the company said they have been offset by savings elsewhere.
“Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing,” the company said.
The Middle East accounts for around 6% of Next’s total turnover.
This comes as Next released its most recent earnings.
The company raised its profit guidance by £8 million to £1.2 billion for the year to January 2027 after better-than-expected sales in January this year.
Pre-tax profits rose by 14.5% to £1.16 billion in the year to January as sales increased by almost 11% to £7 billion.
The company said it has increased the amount of stock it holds by 6% to give protection in the event of supply chain delays, which was partially linked to the development of its warehouses.
The boss of rival fashion retailer H&M also said a prolonged conflict could significantly impact consumer spending.
“A continued conflict, such as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary pressure,” H&M CEO Daniel Ervér said.
Around 3% of H&M’s stores are in the Middle East.
H&M reported first-quarter local-currency sales that decreased by 1%, but good cost control helped the company beat profitability expectations.
At the time of writing, Next plc (LON: NXT) stock rose 4.20% to £12,540. Its market cap is £13.80 billion.
H&M (STO: HM-B) stock decreased by 2.18% to 170.75 Swiss krona. Its market cap is 240.77 billion krona.
