'The gift that keeps on giving': Next delivers increased full-year profit outlook
Next has increased its full-year profit outlook once again after a better-than-expected festive performance, but remains cautious over the outlook amid a worsening UK jobs market.
The high street retail giant, which has about 900 stores, reported a 5.9 per cent rise in UK full-price sales for the nine weeks to December 27, while overseas sales surged by 38.3 per cent.
It now expects pre-tax profits to rise by 13.7 per cent to £1.15 billion for the year to the end of January on full-price sales up 10.7 per cent.
The group had previously guided for profits to increase by 12.2 per cent to £1.14 billion and sales to rise 9.7 per cent.
But Next forecast a slowdown in growth for the following 2026-27 financial year as it sees jobs market troubles weighing on consumer spending, while it is also set to come up against tough trading comparatives and more moderate overseas sales.
The FTSE 100 firm, which is led by chief executive Lord Simon Wolfson, is predicting pre-tax profits will rise by 4.5 per cent to £1.2 billion on sales up 4.5 per cent at £5.9 billion.
On recent Christmas trading, it said: “Growth in the UK slowed but not by as much as we expected.
“We believe that sales benefited from higher stock levels than last year, when supplier deliveries were delayed by disruption in Bangladesh and global freight networks.”
It had previously forecast UK sales to ease back to 4.1 per cent in the Christmas period, but saw its performance beat expectations as online growth lifted to 9.1 per cent, offsetting a more muted 1.4 per cent sales rise in its store estate.
The company – widely seen as a bellwether for the UK high street – has now increased its profit guidance by five times in its past financial year as trading has consistently smashed forecasts and after it benefitted from disruption at close rival Marks & Spencer following its crippling cyber attack in the spring.
However, Next remains cautious over the outlook and warned once again over the impact of rising unemployment, predicting that UK online and store sales growth will pull back sharply to 1.6 per cent in 2026-27.
It said: “Continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses.”
The firm is also expecting overseas sales to grow by a more moderate 16.5 per cent as it reins in recent high spending on marketing.
Richard Hunter, Head of Markets at interactive investor, commented: “In investment terms, Next is the gift that keeps on giving.
"It has delivered another classic update, following a stronger than expected Christmas showing and in typical fashion, has exceeded previous estimates, upped its profit guidance for this year and next while providing a cautious outlook for the year to come; a positive cocktail which investors have almost come to expect.”
Mr Hunter said the momentum is expected to spill over to next year, although at slightly lower levels, “as Next’s famously cautious outlook approach comes into play”.
He added: “It cites a number of headwinds, such as tough comparatives (with the first half this year having been boosted by particularly warm summer weather and the cyber disruption at Marks & Spencer providing additional business), UK employment remaining under strain and an unlikely repeat of the profitable marketing expenditure overseas.”
He continued: “The update once more underlines the group’s unparalleled understanding of the market in which it operates.”