Next raises profit forecast after strong Christmas sales

Fashion retail giant Next has significantly upgraded its annual profit forecast, driven by a robust performance over the crucial Christmas trading period that exceeded market expectations. The retailer, known for its extensive clothing, homeware, and beauty offerings, announced stronger-than-anticipated sales figures, prompting a fifth upward revision to its profit outlook in the past year. However, this positive news was tempered by a cautious outlook for the coming year, with Next warning that UK sales growth is likely to slow considerably, primarily due to anticipated rises in unemployment and their subsequent impact on consumer spending.

In a trading update released after the festive rush, Next reported that full-price sales in the nine weeks leading up to December 27th surged by an impressive 10.6% compared to the same period a year earlier. This substantial increase far outstripped the company’s own predictions and demonstrated a strong consumer appetite for its products during the peak shopping season. The term "full-price sales" is critical here, indicating revenue generated from items sold at their original price, excluding discounted or clearance stock, which typically suggests healthier margins and stronger demand for core lines. This exceptional performance has led the retailer to project annual profits of £1.15 billion for the current financial year, a figure notably higher than its previous estimate of around £1.12 billion. The consistent upward revisions to its profit guidance throughout the year underscore Next’s remarkable resilience and strategic acumen in navigating a volatile retail landscape.

Delving deeper into the sales figures, Next revealed a nuanced picture of its market performance. Within the UK, full-price sales – encompassing both its extensive store network and highly successful online platform – climbed by a solid 5.9% over the Christmas period. This domestic growth was further bolstered by an extraordinary international performance, where revenues soared by 38.3%. This significant disparity highlights Next’s successful expansion into overseas markets, likely driven by its robust online presence and strategic partnerships that allow it to reach a broader global customer base. The strong international showing suggests that Next is effectively leveraging its brand appeal and logistical capabilities beyond its home turf, diversifying its revenue streams and mitigating some of the pressures felt in the domestic market.

Despite the celebratory tone of its Christmas trading update, Next’s forward-looking statements painted a more conservative picture. For the upcoming financial year, the company anticipates a marked deceleration in sales growth. While it expects UK sales (stores and online combined) to have risen by 6.6% in the current financial year, its forecast for 2026-27 is a much more modest 1.6% growth. This significant slowdown is attributed to several macroeconomic headwinds. Charles Allen, a retail analyst at Bloomberg Intelligence, emphasized a key concern: "Next has been consistently warning about the slight edge up in unemployment, particularly among younger people, and they remain concerned about that as something that could slow sales down." The company itself echoed this sentiment, pointing to continuing "pressures on UK employment" which it believes are likely to "filter through into the consumer economy as the year progresses," thereby weighing on overall consumer spending power.

Beyond the looming threat of rising unemployment, Next also acknowledged that the exceptional performance of 2025 would be a tough act to follow. The previous year benefited from several "very favourable summer weather" conditions, which typically boost sales of seasonal clothing and outdoor living products. Additionally, the retailer experienced an unexpected uplift when a rival chain, Marks & Spencer, was impacted by a cyber attack. Such one-off events provided an artificial boost to Next’s sales, making the comparative figures for the next year inherently more challenging to surpass. Allen noted that, despite the cautious outlook, Next’s results reaffirmed that "when it came to the peak season, people did go out and spend in the UK." However, he observed that much of this spending was "bunched in the last few weeks before Christmas," suggesting a cautious consumer approach, likely influenced by people waiting to see the announcements in the Autumn Budget before committing to larger purchases. This indicates a period of economic uncertainty where consumers are carefully managing their finances and delaying discretionary spending.

Industry experts widely praised Next’s performance, particularly its ability to outperform in a challenging retail environment. Emily Salter, lead retail analyst at GlobalData, highlighted that Next had "set a high bar for the UK retail sector with its strong performance over Christmas." She confidently predicted that the company would likely emerge as one of the top performers among non-food retailers during the festive period. Salter attributed much of this success to Next’s well-diversified product range and strategic positioning. She noted, "The retailer is well-known for more resilient categories such as childrenswear, and the fact that it allows shoppers to easily trade up to more premium brands, as better-off consumers focus on buying fewer, higher quality items in clothing and home." This strategy of catering to both everyday needs and aspirational purchases, coupled with its extensive "Next Label" and brand partnership model, provides a broad appeal that helps insulate it from fluctuating consumer trends.

Catherine Shuttleworth, owner of the marketing agency Savvy, echoed these sentiments, commending Next for achieving "good sales in a time where consumer confidence has been pretty suppressed." She expressed confidence in the chain’s continued success, anticipating another "sure-footed" performance in the coming year. Shuttleworth emphasized Next’s deep understanding of its customer base, stating, "Next is one of those organisations in retail that knows its customers pretty well." This intimate knowledge allows the company to effectively tailor its product offerings, marketing campaigns, and sales strategies, fostering strong customer loyalty and driving repeat business. Next’s pioneering catalogue model, which evolved into a sophisticated online and in-store omnichannel experience, has consistently positioned it ahead of many competitors in terms of digital integration and customer convenience.

Looking at the broader retail picture over Christmas, Shuttleworth suggested that overall results would likely be "steady" rather than "stellar." While she expected food retailers to have performed well, capitalizing on essential spending, the clothing sector was anticipated to be more varied, with some players struggling significantly. Her remarks underscored the ongoing divergence in performance across different retail categories and segments. The coming weeks, she predicted, would bring more "talk about some retailers leaving the High Street for good," a stark reminder of the persistent pressures facing brick-and-mortar stores. This prophecy was quickly reinforced by news earlier in the week that the company behind popular retail chains Claire’s and The Original Factory Shop had announced its intention to place them into administration. This move put approximately 2,500 jobs at risk and served as a sobering testament to the harsh realities and intense competition that continue to reshape the UK retail landscape, even as some, like Next, manage to thrive. The challenges of rising operational costs, shifting consumer preferences towards online shopping, and sustained economic uncertainty mean that the retail sector remains a battleground where only the most agile and customer-focused businesses are likely to prosper.