Next warns of supply delays due to shipping attacks

LONDON (BBC News): Next has warned supplies of its products could be delayed if disruption to shipping in the Red Sea continues.

Attacks by Houthi rebels on vessels in one of the world’s busiest shipping lanes have resulted in firms avoiding the area and taking longer routes.

Next said if access “difficulties” continue, delays to stock deliveries to the UK were “likely” early this year.

The warning came as the retailer reported better-than-expected sales in the run-up to Christmas.

The bumper festive period led to the High Street giant, which has about 460 shops in the UK and Ireland, to raise its profit forecast by 5% to £960m for 2024.

But it warned of supply chain “risks” in its trading statement on Thursday.

“Difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year,” the retailer said.

Next is not the first company to warn of issues in receiving goods and products, with global supply chains facing disruption as a result of some of the world’s biggest shipping companies diverting journeys away from the Red Sea.

Furniture giant Ikea said last month supplies of some of its products could also be delayed.

Next chief executive Lord Simon Wolfson told the PA news agency that the disruption could delay stock by “two to two-and-a-half weeks” to reach the UK. “It will impact on sales if this persists for a long time, but not dramatic levels,” he added.

Assaults by Houthi rebels in Yemen on commercial vessels in recent weeks have resulted in many firms deciding to avoid one of the world’s busiest shipping lanes, which sees vessels pass through the strait of Bab al-Mandab – a 20-mile wide channel that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula – and then Egypt’s Suez Canal further north.

The Houthi group has declared its support for Hamas and has said it is targeting ships travelling to Israel, though it is not clear if all the ships that have been attacked have actually been heading to Israel.

But because of the attacks and the threat, several container shipping companies have since diverted vessels to a much longer route around Africa’s Cape of Good Hope and then up the west side of the continent, leading to shipping delays.

Defending ships from attacks is “very difficult”, said Chris Long, director of intelligence for Neptune Port to Port Group, a private maritime security company operating in the Red Sea.
“There are no commercially available systems that you can put on a container ship that can protect you against the armament that the Houthis are deploying at the moment,” he told the BBC’s Today programme.
“Our guards are there primarily to provide reassurance to the ship’s captain to help prepare if they are attacked and to give advice of what to do in the event of attack, there is very little a ship can do to avoid it.”
Some businesses have warned that container costs have increased in the past two weeks due to the disruption, prompting fears that prices in the shops could rise further.
But Next said it planned to “maintain zero inflation in selling prices” on last year as “cost price inflation in our own products is diminishing, mainly as a result of decreasing factory gate prices”.
“The consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties,” the High Street stalwart added.
Lord Wolfson told PA that prices “would’ve been moving down, but we’re having to hold them flat” due to the increased National Living Wage pushing up wage costs.
Next said sales of full-price items had risen by 5.7% over the nine weeks to 30 December, which was much stronger than expected. Fiona Bailey, a senior lecturer in fashion business at Leicester’s De Montfort University and a former buyer for Next, said the retailer’s success was “down to quite a few factors”, including its “stable leadership”.
“They deliver the product the customer wants at the right price, and this is something they’ve been doing consistently for years now,” she told the BBC’s Today programme. While Next performed well over Christmas, sportswear seller JD Sports struggled and downgraded its profit predictions for this year.
JD Sports said its profits would be up to £125m less than previously predicted, which was partly due to more price discounting than it expected, “reflecting more cautious consumer spending”.
Shares in JD Sports sank more than 20% in reaction to the profit warning.