Next chief executive Simon Wolfson has warned that prices on the high street will rise next year, with the tough economic conditions ushering in a "new consumer environment".
Lord Wolfson cautioned that the Government's spending cuts, the forthcoming hike in VAT and a rise in cotton prices meant "next year will be the first time the clothing industry will have to lift its prices in 15 years". Clothing prices could rise by up to 8 per cent, he said. This echoed comments by the discount fashion chain Primark earlier this week.
Next, which has more than 500 stores around the country, posted a "robust set of results in trading conditions that remain testing". Revenues rose 5 per cent to £1.5bn in the first half, while profits were 15 per cent higher at £213m. Sales on the high street were at the lower end of guidance, but this was balanced by outperformance at the Next Directory home shopping arm.
Lord Wolfson said it had been a good first half, but added that sales growth would slow. "We are entering a different type of consumer environment," he said. "The glory days of inexorably growing consumer credit and inexorably growing government spending has come to an end."
The UK economy was unlikely to see a double-dip recession or a meltdown in consumer spending, Next said, but there could be up to five years of sluggish growth. Lord Wolfson said: "We will have to adapt to a new type of consumer environment, one in which like-for-like sales growth is likely to be low for some time and top line growth will need to come from other opportunities. We believe it is sensible to view this environment as the new normal."
Fellow retailer French Connection also reported it was "back on track" after swinging into profit, following losses at this time last year.