Next absorbs £47m Iran war cost hit with selective price rises

From £15m to £47m: how the cost estimate tripled

In March 2026, Next disclosed an estimated £15m hit from the Iran conflict, covering the first three months of the war, according to the company's earlier trading update. That figure has now ballooned to £47m, a more-than-threefold increase, as the duration of the conflict exceeded initial assumptions.

The retailer attributed the escalation mainly to spikes in energy costs and inbound freight charges for transporting goods from overseas to the UK, as reported by City AM. The updated estimate assumes fuel costs remain at current levels and that transport interruptions do not worsen, meaning the final bill could climb further if conditions deteriorate.

The speed of the revision is notable. A £15m forecast issued just weeks earlier has tripled, illustrating how rapidly geopolitical disruption can cascade through supply chains. For any business sourcing or shipping goods internationally, the gap between initial and revised estimates underscores the difficulty of budgeting around conflict-driven volatility.

Broader freight rates on key Asia-to-Europe routes have remained volatile since the conflict began, squeezing margins across apparel and homeware. Next is far from alone in absorbing these costs, but its public disclosure provides an unusually transparent view of the arithmetic involved.

Selective pricing: why Europe is shielded but other markets are not

Rather than applying a blanket price increase, Next has opted for a geographically targeted approach. The company said it will raise prices in countries outside Europe, with increases varying by market but capped at 8 per cent, effective from May, according to its latest trading statement.

Customers within Europe will see no change. Next said it has been able to offset costs in the European market with financial gains, though it did not elaborate on the nature of those gains in its update.

The distinction matters. Shielding European customers, who represent a significant and competitive market for the retailer, preserves price competitiveness in a region where consumers have multiple alternatives. Passing costs through in more distant markets, where Next may face less direct competition or where logistics costs form a larger share of the landed price, is a calculated trade-off.

This selective approach avoids the risk of a uniform price rise dampening demand across every territory. It also signals that Next views its European customer base as more price-sensitive, or more strategically important, than its non-European international shoppers.

Strong sales cushion the blow, for now

Despite the £47m cost hit, Next raised its full-year profit guidance to £1.22bn, according to the company's latest update. Full-price sales were up 6.2 per cent year-on-year, coming in £28m ahead of forecast.

Next attributed the outperformance to what it called "exceptionally strong growth in the first five weeks of the year," as reported by City AM. Shares peaked at 12,905p on the morning of the announcement, though the stock remained down nearly 5 per cent since the start of the year.

The sales cushion is real but conditional. A £28m sales beat against a £47m cost increase still leaves a net shortfall that the pricing adjustments and operational efficiencies must bridge. If freight and energy costs continue to rise, or if the conflict intensifies, the margin pressure will compound.

Next said this "overachievement in sales" was because of "exceptionally strong growth in the first five weeks of the year."

The retailer has also been active on the acquisition front, completing the purchase of shoe company Russell and Bromley earlier in the year, taking on three of its stores in Chelsea, Mayfair, and the Bluewater Shopping Centre, as reported by City AM. That deal adds complexity to the cost picture, though Next has not publicly linked the acquisition to its conflict-related cost disclosures.

What other operators can learn from Next's approach

Next's handling of the Iran war cost escalation offers several practical takeaways for UK businesses exposed to international supply chains.

First, initial cost estimates in conflict scenarios are almost certainly too low. Next's own forecast tripled within weeks. Operators building contingency budgets around geopolitical disruption should stress-test assumptions aggressively and plan for scenarios well beyond the base case.

Second, geographic pricing segmentation can protect core markets. Rather than spreading pain evenly, Next chose to absorb costs in Europe and pass them through elsewhere. Businesses with multi-market exposure can apply the same logic, provided they understand the competitive dynamics and price elasticity in each territory.

Third, strong trading performance buys time but does not eliminate risk. Next's sales beat gave it room to raise profit guidance even as costs surged. Operators without that cushion face harder choices, potentially between margin erosion and customer attrition.

Finally, transparency has value. Next's willingness to disclose specific cost figures, from the initial £15m to the revised £47m, gives investors and partners a clear picture of the impact. For privately held businesses, similar transparency with lenders, boards, and key suppliers can build confidence during periods of uncertainty.

The Iran conflict shows no sign of resolution. For UK retailers and operators dependent on global supply chains, the question is not whether costs will rise further, but how quickly pricing and sourcing strategies can adapt when they do.