High street giant Next has delivered another upgrade to its annual profit guidance, buoyed by a stronger-than-anticipated Christmas trading period. The retailer, however, struck a cautious note for the year ahead, citing a deteriorating UK jobs market as a key threat to consumer spending.
Festive Performance Beats Expectations
The FTSE 100 retailer reported a 5.9% increase in UK full-price sales for the critical nine weeks leading up to 27 December. Its overseas performance was even more robust, with sales soaring by 38.3% during the same period.
As a result, Next now expects pre-tax profits for the year ending January 2026 to reach £1.15 billion, a rise of 13.7%. This is up from a previous forecast of £1.14 billion. Full-price sales are now predicted to grow by 10.7%, compared to an earlier guidance of 9.7%.
The company, led by Chief Executive Lord Simon Wolfson, stated that UK growth slowed less than anticipated. It attributed part of the success to higher stock levels, following supply chain disruptions in Bangladesh and global freight networks the previous year.
Revised Forecasts Signal a Cautious Outlook
Despite the positive update, Next has forecast a sharp deceleration in growth for the 2026-27 financial year. The company predicts pre-tax profits will increase by a more modest 4.5% to £1.2 billion, with total sales rising 4.5% to £5.9 billion.
The retailer warned that challenging trading comparatives and a more moderate pace in overseas sales growth, now expected at 16.5%, will contribute to the slowdown. Crucially, it highlighted "continuing pressures on UK employment" as a factor likely to filter through to the consumer economy.
Consequently, Next anticipates UK online and store sales growth will pull back sharply to just 1.6% in the coming financial year.
A Bellwether's Repeated Guidance Upgrades
This marks the fifth time Next has increased its profit guidance in the current financial year. Its performance has consistently surpassed forecasts, a run partly aided by disruption at close rival Marks & Spencer following a significant cyber attack in the spring of 2025.
Over the festive period, the company's online sales growth accelerated to 9.1%, which helped offset a more muted 1.4% sales rise across its estate of approximately 900 physical stores.
As a business widely regarded as a bellwether for the UK high street, Next's upgraded results and subsequent cautious outlook provide a clear snapshot of both resilient consumer spending and the gathering economic headwinds facing the retail sector.
