Next Profits Surge 15% Despite £15m Iran Conflict Costs
High street giant Next has announced a significant 15% increase in pre-tax profits, reaching £1.2 billion for the year to January 2026. However, the retailer is simultaneously grappling with a £15 million financial blow stemming from the ongoing conflict in Iran, which has driven up air freight and fuel costs. The company warns that consumer prices may need to rise if the Middle East disruption persists beyond three months.
Middle East Conflict Impacts Costs and Sales
Next revealed that the Iran conflict is already damaging its sales performance, particularly in the Middle East region, which accounts for six percent of its total turnover. The retailer attributed a shortfall against its 16.5% international sales growth target directly to the regional disruption. Sales in the Middle East are expected to remain below projections for at least the remainder of the first half of the year.
The firm stated: "At this point, the longer term implications of the conflict are uncertain, and NEXT is not well placed to make predictions. Much will depend on how long the conflict persists, and how much permanent damage is done to the world's energy infrastructure."
Financial Performance and Cost Pressures
Overall sales climbed 11% to £7 billion, driven in part by a 35% surge in global sales, significantly outpacing the UK's 7% growth. However, Next faced £75 million in cost increases over the past year, with the £15 million Middle East impact compounded by:
- Rising national insurance contributions
- Increased wage costs
- Higher interest expenses
- Elevated marketing spend
The company managed to achieve £57 million in savings, including £39 million from returning employee bonuses to standard levels. Despite rising sales of 2.4%, profit from retail stores fell 5% to £193 million, which Next attributed to increased employment costs.
Yorkshire Warehouse Expansion Announced
In more positive news, Next has received planning permission for a major 1.2 million square foot warehouse in Elmsall, Wakefield. The company believes this Yorkshire facility could contribute £2.5 billion to UK sales, supporting its growth strategy focused on fresh and recently-acquired brands.
The retailer has been actively expanding its portfolio, acquiring high-street footwear retailer Russell & Bromley in January, following previous purchases including vintage-inspired retailer Cath Kidston and clothing brand Joules.
Leadership Changes and AI Strategy
Next announced that chairman Michael Roney's contract has been extended by the board, while two board members—Jane Shields and Jonathan Bewes—are departing. In a notable strategic decision, the retailer stated it will not develop a central artificial intelligence function, contrary to many competitors rushing to incorporate AI-powered shopping systems.
The company explained: "The benefits AI can bring to software development, range development, customer service and warehouse operations are so varied, and their challenges so different, that generic advice from a central function would be little more use than a central Spreadsheet Department."
Retail leaders have warned that rising national insurance contributions and minimum wage levels are creating recruitment pressures, with additional costs expected when Labour's workers' rights reforms take effect this year.
