Retailers across Europe are signalling that an extended Middle East conflict could translate into higher shop prices and weaker spending, reported Reuters.
Various businesses that range from clothing retailer H&M to UK supermarket Co-op are pointing to cost pressures building through energy markets and logistics.
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With crude oil climbing above $100 a barrel, retailers say freight and distribution costs are rising and established trading routes are being disturbed.
H&M chief executive Daniel Erver said households could face renewed inflation stress if the conflict does not ease.
In an interview with Reuters, he said: “A continued conflict, such as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary pressure.”
The Swedish fashion group, which reported weak March sales despite first-quarter profit expectations, said its adaptable supply chain should help it respond to disruption linked to the war.
British clothing retailer Next said it could increase prices from June and has allowed for an extra £15m ($20m) in fuel, freight and related costs tied to the conflict, based on an assumption that disruption lasts three months.
Next chief executive Simon Wolfson told Reuters that any move in June or July would be “in the order of 1% to 2% maximum”, though he said increases could be larger if hostilities continue for longer.
He commented: “The real risk is later, when you start to see (the impact of the war) in the price of manufactured goods. Then the price increases could be not 1% or 2% but 5% to 10%.”
Next reported a small profit outperformance for the year to January and said UK sales have not shown a material deterioration since the conflict started.
In Poland, fashion retailer LPP reported a strong fourth quarter, but said higher fuel prices stemming from the war could weigh on results in the year ahead by pushing up transportation and distribution expenses.
Measures of consumer mood and spending patterns are already weakening in several markets.
UK retail sales fell this month at the steepest pace since April 2020, according to a Confederation of British Industry survey.
Separately, British Retail Consortium data indicated UK consumer confidence dropped sharply in March.
In Germany, sentiment has worsened as households brace for higher energy costs, while consumer confidence in Italy slid in March to its lowest level since late 2023.
At Co-op, outgoing chief executive Shirine Khoury-Haq said “consumer confidence does remain fragile”, adding that the war alongside broader pressure on household budgets is keeping shoppers “still cautious”.
Co-op Food’s managing director Matt Hood told Reuters he had not yet seen a direct impact from the conflict on inflation at the “shelf edge”, but said the risk is growing if disruption becomes prolonged.
“There is no doubt that if this continues in the mid to longer term, the concerns around cost on commodities such as animal feed, fertiliser and fuel are valid, and we can’t sit here and underestimate those,” he was quoted as saying.
