Next, Britain's No 2 fashion retailer, expects price rises to be a bigger factor in dampening consumer demand in 2011 than government cuts and tax rises, its chief executive said. "The reality is a lot of the big cuts have gone through already and some tax rises have gone through. So I don't anticipate a moment of revelation," Simon Wolfson told Reuters in an interview on January 05.
"I think far more important is going to be the effect of price increases," he said. Next anticipates its own prices will increase by about 8 percent in the first and second quarter of 2011 as a result of higher input costs, particularly cotton, and the rise in VAT sales tax to 20 percent.
Wolfson, who was made a Conservative working peer last May, said his best guess was that the price rises will "modestly suppress" underlying sales. "I think that it will probably suppress the amount people spend as well as the units that they buy." But he reckons the impact of price rises will be offset by Next adding more retail space and the continued growth of its Directory home shopping business.
Wolfson was speaking after Next posted a slightly worse than expected fall in underlying store sales in the run-up to Christmas, which it blamed on snow, but maintained its guidance for year to end-January 2011 profit.
He said the outlook for 2011-12 was uncertain. "I haven't noticed any significant change in the general consumer environment since November. Certainly on a like-for-like basis sales are going to be sluggish some time."
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