𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

High street chain Next has revealed a £15 million cost hit from the Iran conflict and warned it may need to hike prices if the war is prolonged.

The fashion and homewares retailer said it had set aside the cash to cover additional costs for fuel and air freight due to shipping disruption and soaring oil prices, but that the impact so far can be offset by savings elsewhere in the business.

It cautioned the conflict in the Middle East – a region which accounts for around 6% of its annual sales – was holding back growth in those countries, and is also likely to impact costs, selling prices and consumer demand across the wider group.

Chief executive Lord Simon Wolfson said Next was currently working on the basis that the war lasts for three months, but stressed if the conflict is more prolonged “we will begin to pass costs through as higher pricing”.

It comes as Next reported better-than-expected annual profits, up 14.5% at £1.16 billion on a pro forma 52-week basis, and hiked its earnings outlook for the year ahead to £1.21 billion, though this is based on the Iran war being resolved before the summer.

Lord Wolfson said: “We have accounted for £15 million of additional costs that are likely to arise from the conflict, such as fuel and air freight, on the assumption that the disruption lasts for three months.

“These costs have been offset by savings elsewhere, so do not affect our guidance.

“Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing – but for today that remains a contingency, not a plan.”

Next said sales in its overseas business were already being impacted by the Iran war and cut its guidance for international turnover to 14.3% for the current financial year, down from 16.5% previously forecast.

But it increased its guidance for UK sales from 1.6% to 2.2% thanks to an “encouraging sales performance” in the first eight weeks of the financial year.

The group is expecting overall sales across the business to rise by 4.5%, in line with previous guidance for 2026-27.

Its profit outlook is £8 million more than previously forecast due to better-than-expected full price sales in January and an improved end-of-season clearance.

But it cautioned the Iran war could derail consumer demand and lead to higher costs.

Lord Wolfson said: “As yet, we have no feel for the medium-term effects on supply chain resilience, freight rates, factory gate prices and consumer demand.

“Much will depend on how long the conflict persists, and how much permanent damage is done to the world’s energy infrastructure.”

He added: “If the conflict persists, the costs are likely to be reflected in higher prices to consumers and disruption to our supply chain, both of which are likely to suppress sales.”