Next warns over price hikes and Christmas staff shortages

Fashion giant Next has warned over price hikes and said staff shortages could impact its deliveries in the run-up to Christmas.

Next said some areas of the business were starting to come under pressure from a lack of foreign workers, particularly in logistics and warehousing, which may affect its delivery service going into the peak festive season.

Chief executive Lord Simon Wolfson – a prominent Brexit supporter – called on the Government to ease immigration rules and take a “decisive approach to the looming skills crisis”.

“We anticipate that, without some relaxation of immigration rules, we are likely to experience some degradation in our service in the run-up to Christmas,” the group said.

Lord Wolfson told the PA news agency the group may have to bring forward the next day delivery cut-off from 11pm, but stressed deliveries “won’t grind to a halt”.

The group also cautioned over price hikes amid the supply chain woes, with higher freight costs pushing up prices by about 2% in the first half and further increases set to come.

Next sees prices rising by around 2.5% on average in the first half of 2022, with fashion price tags expected to lift by 1% and homewares by 6% as bigger products take the brunt of the higher freight costs.

Lord Wolfson said the recent move to introduce temporary visas for EU lorry drivers was “late but welcome” and made a plea for the Government not to wait until shortages of skills in other areas becomes a crisis.

Next said: “The HGV crisis was foreseen and widely predicted for many months.

“For the sake of the wider UK economy, we hope that the Government will take a more decisive approach to the looming skills crisis in warehouses, restaurants, hotels, care homes and many seasonal industries.

“A demand-led approach to ensuring the country has the skills it needs is now vital.”

Lord Wolfson added: “I hope that going forward the Government looks further into the future and doesn’t wait until the crisis is upon it.”

The comments came as the group hiked its full-year sales and profit forecasts for the fourth time this financial year after a summer sales surge, helping shares lift 3%.

It reported pre-tax profits of £346.7 million for the six months to July 31, down 16.5% on a year ago but up 5.9% on 2019 levels.

Full-price brand sales jumped 62% year-on-year and were 8.8% higher versus 2019.

Next saw full-price sales soar in June and July, up by a better-than-expected 20% against 2019 levels, while it said the second half had also got off to a strong start.

The group now expects annual sales to rise 10% on 2019 levels and pre-tax profits to reach £800 million for the year to January, up 6.9% on 2019 and above previous guidance of £764 million.

But it cautioned the performance may be hindered by rising costs, supply woes and a potential hit to its delivery service from staff shortages.

“The cost of living, along with the potential effect of seasonal labour shortages on our delivery service, may moderate demand in the months ahead,” it said.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “The challenge will be making sure disruption and price hikes are managed as well as possible to limit unnecessary and avoidable customer backlash.”