Can Next keep a lid on UK prices as it grapples with rising Iran war costs?

Next’s efforts to limit the impact of the Iran war and avoid raising prices in the UK will come under scrutiny after the retailer warned it was facing rising costs.Investors in Next, which is often thought of as a bellwether of the high street, will be hoping to see sustained momentum on sales growth over recent months.In May’s update, Next said UK sales rose by 4.4% over the previous three months, but said sales growth was set to slow to 1% in the second quarter as it comes up against tough comparisons from a year earlier.The company will share the latest figures when it published its half-year financial results on Wednesday and provide an update on recent trading conditions.Next also warned in May that it was facing an estimated cost hit of £47 million from the Iran war, up from the £15 million guidance given in March.The retailer said it would look to hike prices in international countries from May, but that efforts to reduce costs meant it did not need to push through extra price increases in the UK and Europe.However, it cautioned that pricing may need to change if the war disruption and cost hit worsens.Since May, the US’s interim ceasefire deal with Iran has crumbled with a re-escalation of military strikes in the Middle East and shipping through the Strait of Hormuz remaining disrupted.Richard Hunter, head of markets at interactive investor, said: “The Middle East conflict casts a small shadow, accounting for 5% of total group sales, although the group plans to lessen any effects in the region through price rises and a cost cutting exercise there.“Closer to home, the inflationary impact of higher energy prices threatens to heighten input costs as well as crimp consumer demand.“Even so, growth in the UK, which accounts for 78% of overall revenues, has been maintained by a laser focus on costs, trends and delivery.”Read MoreAarin Chekrie, an equity analyst for Hargreaves Lansdown, said: “The group’s doing a good job of streamlining the business to help offset higher costs from the Middle East conflict.“International sales are a key driver of growth, and have recovered quickly following the initial outbreak.“But with tensions in the region rising again, we’re keen to hear how demand’s holding up.“As a leader in the UK market, Next looks well-positioned to navigate challenging conditions better than many of its peers.”