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Brexit: Next warns prices could rise by 5% in 2017 as drop in the pound hit profits
Next shares fell more than 10 per cent in early trading after it warned that its profits would be at the lower end of its guidance after “difficult” Christmas trading
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Clothing retailer Next has warned shoppers they could face price rises of up to 5 per cent in 2017 following the decline in the value of the pound after the UK voted to leave the EU, with cost pressures likely hitting annual profits by up to 14 per cent.
The warning comes as the firm reported a sales drop during the crucial festive shopping period.
The company said full-price sales fell by 0.4 per cent in the 54 days to 24 December compared with the previous year.
As a result, the firm cut its full-year profits forecast to £792m, compared with previous guidance of £785m-£825m, as it prepares for a “challenging” year.
Next said a slump in sterling is pushing up sourcing costs at a time when demand could be vulnerable due to a Brexit-induced squeeze on spending power.
The retailer's shares fell by 12 per cent at the start of trading in London.
Richard Lim, chief executive, Retail Economics, said Next figures confirm that underlying conditions on the high street remain "desperate" for clothing and footwear retailers.
He said: “The labour market is already showing tentative signs of weakening and as inflation accelerates real incomes will come under increasing pressure. Given the weaker consumer backdrop it will be a difficult time for UK retailers to be raising prices."
Brexit Concerns
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The pound is currently down about 10 per cent against the euro since the EU referendum in June, and is 17 per cent weaker against the US dollar.
Economists have warned sterling is likely to plunge to a new record low once Prime Minister Theresa May starts the official proceeding to leave the EU.
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