Next has announced that it will raise prices on some clothing to offset “an usually high” £73m increase in staff wages and taxes.
The High Street retailer said that costs will grow due to measures announced in the autumn Budget, including higher National Insurance payments by employers as well as an increase in the National Living Wage.
Next expects prices to increase by 1%, which is below the current rate of inflation.
More than half of companies are planning to lift prices over the next three months to help with higher costs, the British Chambers of Commerce business group said this week.
Next said the price rise – will offset around £13m in wage and tax costs – was “unwelcome”.
The price increase will only be on certain items of clothing. Next also said that shoppers have continued to shift what they spend their money on. Instead of buying cheaper items, they are choosing mid to higher priced items.
“To be clear, consumers are not necessarily spending more overall, but buying fewer, marginally more expensive items,” the company said in a Christmas trading update.
“We believe that this trend will continue into next year.”
The retailer also said it expects UK sales growth to slow as the National Insurance increases filter through into the wider economy.
But it still forecasts profit to rise by 3.6% to more than £1bn next year.
Richard Lim, chief executive of Retail Economics, said there were “challenging conditions on the High Street”.
He said retailers had seen “successive waves of disruption” and rising costs would “really squeeze margins”.
