High-street retailer Next has revealed it has taken a £15 million cost hit from the ongoing Iran conflict.
The fashion and homeware giant is cautioning that prolonged hostilities could necessitate price increases for consumers.
Next has allocated the sum to cover additional expenses related to fuel and air freight, driven by significant shipping disruptions and escalating oil prices.
It said that these costs are currently being absorbed through savings elsewhere in the business.
Next noted that the Middle East, a region contributing approximately 6 per cent of its annual sales, is already experiencing stunted growth due to the conflict.
The company anticipates further impacts on its overall costs, selling prices, and consumer demand across the wider group.
Chief executive Lord Simon Wolfson said that Next is presently operating on the assumption that the conflict will resolve within three months.
However, he said that should the war be more protracted, “we will begin to pass costs through as higher pricing”.
He added: “But for today that remains a contingency, not a plan.”
The disclosure comes as Next reported stronger-than-expected annual profits, climbing 14.5 per cent to £1.16 billion on a pro forma 52-week basis.
The company has subsequently raised its guidance for the year ahead to £1.21 billion, a forecast contingent on the Iran conflict concluding before the summer.
Next said sales in its overseas business were already being impacted by the Iran war and cut its guidance for international turnover to 14.3 per cent for the current financial year, down from 16.5 per cent previously forecast.
But it increased its guidance for UK sales from 1.6 per cent to 2.2 per cent thanks to an “encouraging sales performance” in the first eight weeks of the financial year.
The group is expecting overall sales across the business to rise by 4.5 per cent, in line with previous guidance for 2026-27.
Its profit outlook is £8 million more than previously forecast due to better-than-expected full price sales in January and an improved end-of-season clearance.
But it cautioned the Iran war could derail consumer demand and lead to higher costs.
Lord Wolfson said: “As yet, we have no feel for the medium-term effects on supply chain resilience, freight rates, factory gate prices and consumer demand.
“Much will depend on how long the conflict persists, and how much permanent damage is done to the world’s energy infrastructure.”
He added: “If the conflict persists, the costs are likely to be reflected in higher prices to consumers and disruption to our supply chain, both of which are likely to suppress sales.”
