European retailers warn of price shock, weaker demand from prolonged Middle East conflict

By Greta Rosen Fondahn, James Davey and Sarah Young

STOCKHOLM/LONDON, March 26 (Reuters) - Europe's retailers warned connected Thursday that a prolonged Middle East struggle could propulsion up sticker prices successful Europe and dent user request for companies from covering elephantine H&M ‌to British supermarket concatenation Co-op.

The cautions are the bluntest from the assemblage truthful acold arsenic companies consciousness the ripples of the ‌month-old war's impact, with crude prices shooting supra $100 per barrel, raising proscription costs and disrupting planetary commercialized flows.

"A continued conflict, specified arsenic with continued precocious vigor prices, volition make ​inflationary unit connected a user who already has pugnacious inflationary pressure," H&M CEO Daniel Erver told Reuters successful an interview.

Swedish-based H&M, which posted brushed March income that weighed connected its shares contempt a first-quarter nett beat, said its flexible proviso concatenation would let it to accommodate to fallout from the war.

STICKER PRICE SHOCK IF WAR DRAGS ON

British covering retailer Next said it whitethorn request to rise prices successful June, and has factored successful 15 cardinal ‌pounds ($20 million) of other fuel, freight and different costs ⁠linked to the war, assuming 3 months of disruption.

CEO Simon Wolfson told Reuters that immoderate terms summation successful June oregon July would beryllium "in the bid of 1% to 2% maximum," rising further if the struggle continues. Next ⁠posted a constrictive nett bushed for the twelvemonth done January.

"The existent hazard is aboriginal erstwhile you commencement to spot (the interaction of the war) successful the terms of manufactured goods. Then the terms increases could beryllium not 1% oregon 2% but 5% to 10%," helium said.

On a brighter note, helium said radical were ​still ​spending for now.

"Our acquisition has been that mostly radical lone tighten their belts ​when prices really spell up oregon taxes really spell up ‌rather than successful anticipation of it," Wolfson said. Next has not seen a notable driblet successful UK income since the warfare began.

Poland's biggest manner retailer LPP reported a rosy fourth-quarter connected Thursday, but warned the struggle was driving up substance prices and could impact its show this twelvemonth owed to higher proscription and organisation costs.

CONSUMER CONFIDENCE REMAINS 'FRAGILE'

Europe's consumers are starting to consciousness the pinch.

British retail income tumbled this period by the astir since April 2020, a Confederation of British Industry survey showed connected Tuesday. A abstracted British Retail Consortium survey connected Thursday showed UK user assurance ‌collapsed successful March.

German user sentiment is worsening arsenic households brace for vigor prices ​driven higher by the war, portion morale among Italian consumers fell successful March to ​its lowest since precocious 2023.