It predicted that prices would have to rise an extra 6% between 2016 and 2020.
The increase is a combination of 1% from the living wage itself and 5% from the knock-on effects on other wages.
The Living Wage means that the minimum wage will be set at £7.20 an hour for over-25s from April 2016, which is forecast to rise to £9.35 in 2020.
The prediction came with Next's half year results - pre-tax profits came in at £347m, up 7% from the same period of 2014.
Earlier in the year, the company's shares fell after it issued a cautious sales outlook, predicting they would grow between 1.5% and 5.5%.
In the first half, total Next group sales were up 2.7% compared with the same period of 2014.