Simon Wolfson, Next's chief executive, has warned that a "speculative bubble" in the cotton market will lead to near-double-digit price rises on clothing next year, as the fashion retailer's underlying sales slipped behind City expectations in its third quarter. Next has previously warned that a surge in cotton prices would cause a 5 to 8 per cent rise in clothing prices in the first quarter, but Lord Wolfson said yesterday that the uplift would be at the top end of the range.
He said: "People are reserving forward and buying forward cotton [contracts for delivery in the future] and securing their supplies because they have [got] their fingers burnt. And that is pushing up the price."
This week, the British Retail Consortium said cotton has risen 90 per cent over the past 12 months, which contributed to overall shop price inflation hitting 2.2 per cent in October.
But Lord Wolfson stressed that cotton was just one part of the price equation and cited increased competition for manufacturing facilities in China.
He said: "Capacity is an issue across the industry. Rising wages in the Far East and capacity constraints are other issues. We are definitely pushing more aggressively into new territories." Next is looking to move more manufacturing to countries, including Vietnam, Bangladesh and Laos.
For the third quarter to 30 October, total retail sales at Next fell by 0.3 per cent.