 Despite the rising costs in fabric and manufacturing, high street retailer Next is lowering its womenswear prices by 7%. According to Credit Suisse, Next has dropped prices by up to 7% on current season womenswear.
Credit Suisse analyst Tony Shiret said in a note today that an investigation in to nearly 20% of Next’s current womenswear ranges showed that average selling prices were down by 7% year-on-year.
 He said: “This has thrown off a result we did not expect.” He added: “This makes sense in the context of tightening consumer spend and points to sensible risk management in our view (albeit the re-mix of product involved is likely to have been achieved through some de-specification of product).”
Next chief executive Simon Wolfson said last year that he expected clothing prices to increase at the upper end of a 5-8% forecast for spring 11, due to the well documented increases in the price of cotton and other fabric prices, freight and labour costs.
Shiret added that Next’s Directory business had been more profitable than originally thought.
An analysis of the balance of Next’s profit between its retail arm and the Directory showed that the mail order and online arm has supported the “declared profitability” of the stores, said Shiret.
He added: “As Directory is entering another growth phase these favourable dynamics should continue to underpin forecasts. The analysis also highlights potentially a greater gearing to better sales performance at Retail than is currently supposed in our view.”
Next will report its preliminary results on March 24. Shiret said that he forecast that Next would update cautiously on near term trading prospects. He added that he did not expect changes in profit estimates for the 2011/2012 year.
Image: Next SS11
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