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

Core Viewpoint - European retailers are warning that a prolonged conflict in the Middle East could lead to increased prices and reduced consumer demand across various sectors, including clothing and groceries [1][2]. Group 1: Impact of Conflict on Retailers - The ongoing war has caused crude oil prices to exceed $100 per barrel, resulting in higher transportation costs and disruptions in global trade [2]. - H&M reported soft sales in March, despite beating first-quarter profit expectations, and emphasized that its flexible supply chain would help mitigate the war's impact [3]. - British retailer Next indicated that it may need to raise prices by 1% to 2% in June due to an estimated £15 million ($20 million) in additional costs from the conflict, with potential for further increases if the situation persists [4]. Group 2: Consumer Behavior and Confidence - Next's CEO noted that while current spending remains stable, future price increases could lead to more significant impacts on consumer behavior, potentially raising prices by 5% to 10% if the conflict continues [5]. - Consumer confidence in Europe is deteriorating, with British retail sales experiencing their largest decline since April 2020 and a significant drop in consumer confidence reported in March [7]. - German and Italian consumer sentiment is also declining, as households prepare for rising energy prices linked to the ongoing conflict [7]. Group 3: Regional Retailer Responses - LPP, Poland's largest fashion retailer, reported strong fourth-quarter results but cautioned that rising fuel prices due to the conflict could negatively affect its performance in the current year [6].