Next chief executive Lord Wolfson remained cautious this week despite reporting better than expected sales, warning that any rises in commodity prices or interest rates could slow growth.
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Wolfson said he expected escalating commodity prices to annualise within the next year but was anxious about future rises.
He said: “We expect commodity price inflation to ease. [Prices are] not going to get any lower. The hope is that it doesn’t go up again.”
Next expects its clothing prices to increase by 8% year-on-year in the second half. Despite prices forecasted to be marginally higher than the first half it is at the lower end of previous guidance of 8% to 10% due to price negotiations and finding new suppliers.
Wolfson also warned that a substantial interest rate hike could hit consumer spend. He said: “We expect a rise in interest rates. We’re just hoping it’s not too dramatic.”
The high street bellwether’s sales in its first quarter to April 30 rose 5.2%, which it said was “significantly better than expected”. It had forecast sales could be up from 0.5% to 2.5% for the first half six weeks ago but Wolfson said the warm weather over Easter and the royal wedding had added 2.5% to sales.
However, like-for-likes in the period were down 3%, but Wolfson said the figure was “much better than we expected”. He said: “People have less disposable income and we’ve put prices up so a drop in same store sales was expected.”
He said consumers had brought forward summer purchases because of the hot spell and did not expect this to continue. “The economic outlook hasn’t changed. The situation with public sector cuts is still uncertain,” he said.
Directory sales, which now account for one third of the retailer’s overall sales, continued to surge, growing 14.8% following the retailer’s aggressive marketing of its improved delivery service.
Next now expects total sales for the year to be between 1% and 4% higher than last year, and expects to deliver pre-tax profit in the range of £535m to £585m, about £15m ahead of its own expectations, revealed in March.