Next ups guidance as international growth offsets tempered UK outlook

Next PLC on Thursday raised full-year profit guidance once again despite taking a more cautious view of prospects for sales growth in the UK.

The Leicester-based clothing and homewares retailer, led by Chief Executive Simon Wolfson, has made a habit of under-promising and over-delivering, making around 21 profit guidance upgrades since the start of financial 2024, with the most recent in August.

Next now expects full-year pretax profit of £1.26 billion, raised modestly from £1.24 billion previously. This would be up from £1.19 billion posted in the 52 weeks to January 31, 2026.

Full-price sales are forecast to grow 6.7% versus 6.3% previously.

In addition, Next now expects full-year post-tax earnings per share of 820.8 pence, up from 812.9p previously, which would be on-year growth of 10%.

The FTSE 100 listing said the increase is the result of a small upgrade in sales expectations and some additional cost savings, mainly in warehousing.

In response, shares in Next rose 1.5% to 14,780.00p each in London on Thursday morning, with the wider FTSE 100 up 0.5%.

Despite the overall profit upgrade, Next moderated expectations for full-year sales growth in the UK to 2.0% from 2.8%.

"Our primary concerns are rising inflation, higher mortgage interest costs and a weak employment market. These worries will only be compounded if they are accompanied by tax increases," the firm said.

Next expects a "slow, steady decline" in consumer spending but not a "precipitous" drop.

Next Brand Online UK sales growth is expected to slow to 3.4% in the second half from 7.4% in the first, while Next Brand UK sales growth is expected to ease to 1.0% from 2.1%.

For the full year, Next expects Next Brand Online UK sales growth of 1.5% and non-Next Brand Online UK growth of 10%.

In contrast, the retailer raised guidance for international online sales by £40 million for full-year growth of 22%.

Online international sales growth is expected to slow to 21% in the second half of the financial year after surging 24% in the first.

The news came as Next reported pretax profit rose 11% to £566 million in the 26 weeks to August 1 from £509 million a year earlier.

Group pretax profit rose 10% to £569 million from £515 million, ahead of £561 million consensus cited by RBC Capital Markets.

Revenue increased 9.6% to £3.45 billion from £3.14 billion, ahead of £3.5 billion consensus, as full-price sales increased 7.7% and total group sales rose 9.0%.

"The first half was much better than we originally anticipated, both in the UK and overseas," the company commented.

Next said performance in the first half is "all the more unexpected" given the strength of sales last year, although it accepted that part of this "overperformance has been the result of two unusually warm summers in the UK."

Cost of sales increased to £1.94 billion from £1.77 billion and distribution costs to £541.0 million from £482.7 million.

The firm declared an interim dividend of 98 pence per share, up 13% from 87p a year earlier. It said it has bought back £355 million of shares so far this year and has a further £180 million of surplus cash available to return to shareholders.

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