Next prices to rise 8% due to cotton 'bubble'

3rd Nov 2010 07:08

High street fashion giant Next will raise its prices by 8% early next year due to soaring cotton prices."As a result of further rises in the price of cotton, retail price rises are likely to be at the top end of our previously stated 5% to 8% range for the first quarter of next year," the firm commented.How long prices stay that high, or even go higher, will depend on the longevity of what Next describes as "a speculative bubble in cotton prices". The price hikes will add to growing fears over inflation and consumer spending with a VAT increase to 20% already on the way in the New Year. The comments overshadowed a solid third quarter update with sales growth of 2.2% towards the top end of its indicated 0-3% guidance, though Next added it may struggle to maintain this growth in the fourth quarter. "We maintain our brand sales guidance range of 0 per cent to +3 per cent, albeit that the fourth quarter presents tougher comparatives than the third and we may not maintain the current position at the upper end of the range," it said.Once again, good sales through its directory carried its shops business. Retail sales fell by 3.3%, like-for-like, in the three months to end October, though this is within Next's previous indicated range. Directory sales rose by 7.9%, right at the top of expectations.Profits are in line with previous forecasts. Next left unchanged its estimate of a total between 535m to £560m for the year to January 2011, with earnings per share tipped to grow by between 14% and 19% to 214p to 224p.