The FTSE 100 extended its New Year rally, moving 0.5% higher to 10,052 as banks and oil companies were in demand.
Next impressed with its Christmas trading update. That was bad news for Marks & Spencer as it lost clothing business to Next last year during months of cyberattack disruption. Investors appear to have concluded that Next’s success means further weakness for M&S, with shares in latter down 1.5%.
Adidas slumped 7% after suffering a double downgrade. Bank of America switched from ‘buy’ to ‘underperform’, cutting its earnings forecasts and suggesting that more modern sporting names like On could attract stronger investor interest, as well as citing Nike’s turnaround efforts. This had a negative read-across to JD Sports, which is a major seller of Adidas shoes, leading to a 6.2% drop in the UK retailer’s share price.
Prudential jumped 1.7% after launching a new $1.2 billion share buyback, music to the ears of investors.
Next
Traditionally one of the first to report on Christmas trading, Next is sometimes pegged as a seasonal bellwether for the retail sector. However, the strength of its business relative to some of its rivals means any comparison may not be too instructive.
Next had a merry little Christmas buoyed by strong third party and international sales.
The company is warning of pressures on the domestic jobs market feeding through to sales and is guiding for a significant easing in the blockbuster growth it has been enjoying overseas.
To what extent this is the usual massaging of expectations or a genuine concern about the outlook will only become apparent over the course of the year. One challenge Next faces is a rise in labour costs as a higher national living wage comes into force.
As usual, Next shows refreshing clarity about what investors can expect in terms of capital returns and this looks generous, which may help to sustain its appeal to investors through any turbulence in 2026.
Ultimately, Next is an example of excellence in the retail space. It has levers to pull to achieve growth even if the outlook in the UK remains uncertain, not least acquisitions, and it would not be a surprise if it beat conservative guidance again.
Supermarkets
Data from Worldpanel paints an interesting picture of Christmas trading for the grocery sector as investors await reports from Tesco and Sainsbury’s later this week.
Worldpanel data shows a slight easing in grocery price inflation, which seems to have encouraged some shoppers to go on a bit of a splurge. Sales of premium own-label products like Sainsbury’s Taste the Difference offering and Tesco’s Finest range were above £1 billion for the first time, suggesting consumers were in the mood to treat themselves over the festive period.
On the flipside there is still appetite for a deal. Discounters Aldi and Lidl have already reported strong festive trading, and this is backed up by figures showing they enjoyed their biggest ever Christmas market share in 2025.
InPost
Dan Coatsworth, Head of Markets at AJ Bell, comments:
Polish parcel locker firm InPost has received a takeover approach from an undisclosed party. This looks like an opportunistic bid following a poor year for the share price.
InPost has muscled in on the UK delivery market, becoming a courier of choice for many retailers and people using resale platforms like Vinted. It has positioned itself as a more efficient and convenient alternative to Royal Mail, utilising a growing network of lockers and undercutting the UK rival on home delivery prices.
A key selling point for consumers is the ability to use InPost’s lockers to send parcels without needing to print off labels – so no queuing in a shop or needing a printer at home.
In recent years, it has bought Menzies Distribution and Yodel to strengthen its position in the UK market. However, the shares have suffered from a slowdown in parcel volume growth in its homeland, ongoing competition and price pressures, and a legal dispute with Polish e-commerce platform, Allegro. Relations have soured between the two companies amid allegations that Allegro has violated terms of a delivery agreement.
While InPost has some issues to resolve, it is a highly attractive takeover target for someone looking to get ahead in the European parcel delivery market.
Now that the takeover of Royal Mail is done and dusted, it will be interesting to see what International Distributions Services does next in the parcels space. It has expressed a desire to roll out more lockers in the UK, and gobbling up InPost could help in this quest as well as expanding its position geographically. However, there are UK competition issues to consider if it bids for the group and the fact that fixing Royal Mail is a big job to do without the hassle of integrating another business on top.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
