Next profits hike... but Living Wage will raise prices
Retail chain Next, which is expanding in Northern Ireland, saw profits rise 7.1% in the first half of the year, but warned it might have to hike prices to pay its staff the living wage.
Pre-tax profits hit £347.1m for the half year to July, up from £324.2m a year earlier. Investors reacted positively, with the share price rising 2% in early trading.
Next said the impact of the living wage would be "manageable", but warned of possible price hikes as it faces soaring wage costs.
The retailer is set to open its latest branch in Bangor's Bloomfield Shopping Centre by April next year, and already has around two dozen stores throughout Northern Ireland.
Next's latest offering will take over a large chunk of the Bloomfield shopping centre. Bloomfield is on the market for £54m - and agents Savills this week said the promise of a new Next was boosting tenant demand.
Next has estimated the cost of implementing the living wage to be £2m for next year, but said it could rise to £27m a year as the requirement grows.
Only £11m of that cost will go towards ensuring all staff are paid the minimum level, with £16m used to maintain pay differentials between staff.
These extra costs could mean a 1% price hike for consumers.
However, it added this was a "pessimistic view of the required price rise" as it had assumed no improvements in productivity.
"In summary... we believe that the burden is manageable," it said.
However, the company cautioned that overall wage rises would add a further £120m to annual costs. This could add a further 5% to price rises, meaning an increase of 6% by 2020 as a result of wages.
The company reported a 0.2% rise in sales across its stores in half-year figures, while Next Directory sales surged by 8.2%.
Full-price brand sales were 3.3% higher and the group said it was maintaining its guidance for the full year, with brand full price sales expected to be up between 3.5% and 6%.
"This implies that sales in the second half will be up between 3.5% to 7.5%," Next said.
It added: "At first sight, guidance for the second half might appear optimistic, given that we only achieved full price sales growth of 3.5% in the first half."