High street retailer Next has delivered a stronger-than-anticipated Christmas trading performance, prompting it to upgrade its annual profit forecast for a fifth time. However, the FTSE 100 firm has simultaneously issued a stark warning about the year ahead, citing a deteriorating UK jobs market as a major threat to consumer spending.
Festive Sales Surpass Expectations
The fashion and homeware chain, which operates approximately 900 stores across the UK, reported a 5.9% increase in full-price sales in its home market for the critical nine-week period leading to 27 December. This robust growth was significantly bolstered by a remarkable 38.3% surge in overseas sales.
As a result of this festive boost, Next now anticipates its pre-tax profit for the financial year ending January 2026 to reach £1.15 billion, marking a 13.7% rise. This is an upgrade from its previous guidance of £1.14 billion. The group also revised its full-price sales growth expectation upwards to 10.7% from 9.7%.
The company, led by Chief Executive Lord Simon Wolfson, attributed the positive surprise partly to higher stock availability compared to the previous year, when deliveries were hampered by disruptions in Bangladesh and global freight networks.
Online Growth Offsets Store Performance
A closer look at the Christmas figures reveals a tale of two channels. While sales growth in physical stores was a more muted 1.4%, the company's online operation saw a significant acceleration, with growth jumping to 9.1%. This digital strength was crucial in offsetting the softer in-store performance and beating the company's own UK sales forecast of 4.1% for the period.
Next's consistent outperformance throughout the financial year has been notable, with the business also benefiting from operational disruptions at key rival Marks & Spencer following a cyber attack in the spring.
A Cautious Outlook for 2026-27
Despite the current success, Next's outlook for the coming financial year is decidedly prudent. The retailer forecasts a sharp slowdown, predicting sales and profit growth to moderate to just 4.5%. It expects sales to reach £5.9 billion, with pre-tax profit rising to £1.2 billion.
The company projects that growth in combined UK online and store sales will decelerate dramatically to 1.6% in the 2026-27 financial year. This caution is rooted in mounting concerns over the UK employment landscape and the challenge of competing against exceptionally strong sales figures from the previous year.
"Continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses," the company stated, highlighting the primary risk to future performance. This warning underscores the fragile confidence within the retail sector as external economic headwinds gather strength.
