Good news for fashion as Next signals end of cost price inflation

The change is likely to relieve some of the pressure on fashion retailers generally, who will not have to pass on further cost rises to shoppers at a time when consumer confidence is under pressure.

Next chief executive Lord Wolfson said he does not expect selling prices to rise for spring 2012, benefiting from factors such as lower cotton prices. He said: “We’ve not said we’re lowering prices, but it’s not an additional price rise. It will remove a drag on sales.”

Cotton prices have been plummeting in recent weeks. In July alone they fell 35%, according to the BRC-Nielsen Shop Price Index.

Investec analyst David Jeary said that Next’s news was also positive for “all clothing peers from a gross margin perspective” and Retail Week Knowledge Bank director Robert Clark said the development was good for consumer confidence.

However, Verdict practice leader Maureen Hinton cautioned that the demand environment next year will remain challenging for retailers because of the effect on consumers of factors such as rising oil and transport prices.

She said: “Inflation dropping will help with margins, but it won’t stimulate more demand. People are more circumspect with spending.”

Wolfson forecast cost price inflation would continue at the same rate as during the first half, 8%, for the rest of the year before easing in 2012.

Next reported a total sales rise of 3.2% for the 26 weeks to July 30. Retail revenue dropped 1.7% but that was offset by Directory sales which soared 15.1%.

Next-owned brand Lipsy is to launch internationally after signing a deal with Middle East trading house Alhokair. The brand will debut in Egypt and Morocco.