Next warning on autumn price rises

The high street giant, which has implemented average price rises of around 6% on its spring and summer products, has seen cotton prices climb to record highs while wage demands in the Far East have also increased.

The warning came as the retailer reported a 9% rise in pre-tax profits to £551 million in the year ending January. The increase was largely down to cost savings as the chain saw a 4% decrease in same-store retail sales.

Next suffered a torrid Christmas season, having revealed that the December snowfall cost it £22 million in lost sales.

The chain, and the wider retail sector, has been hit by a slowdown in consumer spending this year, as the VAT hike from 17.5% to 20% and soaring input costs squeeze household incomes.

Chief executive Simon Wolfson warned: “Things are likely to get worse before they get better.”

He said: “Retailing will feel like walking up the down escalator - we will have to work hard to stand still.

“It seems likely that recent worldwide inflation in fuel, food and other essential commodities will further add to the financial pressure on the consumer. We believe inflation is exerting a greater burden on our customers’ finances than Government cuts or lack of credit.”

Next said it was able to deliver profit growth through controlling stocks and costs.

But the company did receive a boost from its online business - Next Directory - which now accounts for 27% of sales and 40% of profits. The number of customers using the website increased by 12.3% to 2.7 million.

The group opened eight new stores in the period and hopes to open 15 new Home stores in the year ahead. The chain currently has 29 Home stores in the UK.

The company said it expects profits for the new financial year to be between £520 million and £570 million. This is in line with current market expectations.

Shares in Next were up 4% today.