British retail giant Next has upgraded its annual profit forecast for the fifth time this year after a stronger-than-expected Christmas performance. But the FTSE 100 firm warns of tougher times ahead as rising UK unemployment threatens consumer spending.
Next reported a 5.9% rise in UK full-price sales and a 38.3% surge in overseas sales during the nine weeks to December 27. The company now expects pre-tax profits to hit £1.15 billion for the year ending January, up 13.7% from last year. That marks an increase from its previous guidance of £1.14 billion.
Online growth accelerated to 9.1% over Christmas while store sales rose 1.4%. The retailer benefited from disruption at close rival Marks & Spencer following a cyber attack earlier this year.
Cautious outlook ahead
Despite the strong results, Next predicts a sharp slowdown in the 2026-27 financial year. The company expects profits to rise just 4.5% to £1.2 billion, with UK sales growth pulling back to just 1.6%.
Next warned in a company statement: «Continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses.» The company also pointed to supplier delivery delays last year that boosted recent comparisons. «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,» Next said.
David Hughes, retail expert at Shore Capital, acknowledged Next's strong trading but called the caution understandable. «Following what were virtually perfect trading conditions last spring the apparel sector will be facing into tough comparisons in the first half of 2026,» he said. «Meanwhile the 4.1% increase in the national living wage will see labour costs rise again, consumer confidence remains subdued and unemployment is on the rise.»
Hughes added: «While we expect the excellent Next to continue do better than most, this tough backdrop may make future upgrades harder to come by.»
Next shares rose 2% in morning trading on Tuesday. The company operates about 900 stores across the UK.
Note: This article was created with Artificial Intelligence (AI).
