Next Warns of Supply Delays Due to Shipping Attacks
Next, the renowned UK retailer, has issued a warning that its product supplies could face delays if the disruptions to shipping in the Red Sea persist. These disruptions are a result of attacks by Houthi rebels on vessels, causing companies to avoid the area and opt for longer routes. If access difficulties continue, Next anticipates delays in stock deliveries to the UK in the early part of this year.
This cautionary statement comes as Next reports better-than-expected sales in the lead-up to the Christmas holiday. The company has subsequently raised its profit forecast by 5% to £960m for 2024. However, the retailer acknowledges the risks associated with its supply chain amid the shipping disruptions caused by the attacks in the Red Sea.
Next is not the only company to raise concerns about goods and product deliveries, as global supply chains continue to face upheaval from major shipping companies diverting their routes away from the troubled region. Furniture giant Ikea also expressed worries about potential delays in its product supplies.
Lord Simon Wolfson, the chief executive of Next, explained that the disruptions could cause a delay of two to two-and-a-half weeks in stock reaching the UK. While he acknowledged the potential impact on sales, Wolfson reassured that it would not be at a dramatic level.
The attacks on commercial vessels by Houthi rebels in Yemen have prompted numerous firms to steer clear of the Red Sea, one of the busiest shipping lanes globally. This strategic waterway requires vessels to pass through the strait of Bab al-Mandab, a narrow channel between Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula, before proceeding to Egypt’s Suez Canal.
Chris Long, the director of intelligence for Neptune Port to Port Group, a private maritime security company operating in the Red Sea, highlighted the challenges of defending ships against these attacks. He stated that there are no readily available systems to protect container ships from the rebels’ armament. The security personnel on board mainly offer reassurance to captains and provide guidance on preparedness and response in case of an attack.
The disruptions in shipping have resulted in increased container costs over the past two weeks, raising concerns of potential price hikes in stores. However, Next plans to maintain zero inflation in selling prices, stating that cost prices for its own products are diminishing. Furthermore, the retailer expressed that the consumer environment appears more favorable, despite some uncertainties.
Next reported a strong performance during the Christmas period, with sales of full-price items rising by 5.7% over the nine weeks leading up to December 30th. Fiona Bailey, a senior lecturer in fashion business, attributed Next’s success to various factors, notably its stable leadership and consistent delivery of desired products at competitive prices. In contrast, sportswear seller JD Sports struggled over the same period and downgraded its profit predictions for this year, causing its shares to plummet by more than 20%.
As the disruptions to shipping in the Red Sea persist, businesses face the challenges of potential delays and increased costs. However, Next remains committed to delivering quality products to its customers at affordable prices, despite the prevailing uncertainties.
