Fashion retailer Next has warned that its supplies could be delayed if shipping disruptions in the Red Sea continue. Houthi rebels’ attacks on vessels in one of the busiest shipping lanes in the world have caused companies to take longer routes to avoid the area. Next reported better-than-expected Christmas sales, and consequently raised its profit forecast for 2024 by 5% to £960m. However, the company warned of supply chain “risks”, particularly from access difficulties to the Suez Canal. If difficulties continue, UK stock deliveries may face delays in the early part of the year.
As the world’s largest shipping companies are redirecting their routes from the Red Sea, several businesses have warned that container costs have already increased, potentially leading to further price rises in shops. Lord Simon Wolfson, Next’s CEO, said that the disruption could cause a delay of “two to two-and-a-half weeks” in UK supply chain. Some of the major freight carriers have diverted their vessels to the much longer route around Africa’s Cape of Good Hope and up the continent’s west side, leading to significant shipping delays.
Chris Long, director of intelligence at Neptune Port to Port Group, a private maritime security company, noted that “defending ships from attacks is very difficult.” There are currently no commercially available systems to defend container ships against the kind of armament that is deployed by the Houthi rebels. Although Next is planning to ‘maintain zero inflation in selling prices’, it is likely that businesses will face increasing supply chain costs and longer delivery times, leading to higher prices in shops.
Next revealed that sales of full-price items had risen by 5.7% over the nine weeks to 30 December, leading to a much stronger Christmas sales rate than expected. Fiona Bailey, a senior lecturer in fashion business at Leicester’s De Montfort University, attributed the retailer’s success to its “stable leadership,” which has allowed the business to deliver what customers want at the right price consistently. While Next has performed well over Christmas, sportswear seller JD Sports has downgraded its profit forecasts for this year. Its profits are expected to be up to £125m less than predicted, which is partly due to more price discounting than expected, reflecting “more cautious consumer spending.”
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