NEXT raises outlook despite bracing for tax hike

NEXT has revealed an annual profit haul of more than £1 billion and hiked its outlook for the year ahead, despite worries over the impact of Budget measures on consumer confidence.

The high street retail giant, which has 457 stores across the UK, reported pre-tax profits of £1.01 billion for the year to January, up 10.1% on a year earlier.

It said trading had been better than expected in the first eight weeks since its year-end, helping it to raise its guidance for 2025-26, pencilling in sales growth of 5% to £5.3 billion and profits up 5.4% to £1.07 billion.

NEXT had previously forecast full-year sales to rise 3.5% and profits to rise by 3.6% to £1.05 billion.

Shares lifted 6% in early morning trading on Thursday.

Chief Executive Lord Simon Wolfson said a strong first half will help offset a tougher end to 2025, with next month’s national insurance hike set to hit jobs and weaken consumer spending.

The group is forecasting sales growth to almost halve to 3.5% in the second half, down from an upwardly revised 6.5% in the first six months.

Lord Wolfson said: "We expect the UK tax rises in April to weaken the UK employment market and negatively impact consumer confidence as the year progresses."

The group has already said it will have to raise prices by around 1% to offset the impact of Labour’s rise in national insurance contributions (NICs) and the minimum wage hike on its labour costs, with both taking effect in April.

NEXT said that, across its stores, it saw like-for-like full price sales fall 1.2% over the year to January 25 and profits fall 3.2% to £204 million. Online profits jumped 8% to £444 million thanks to a 4.6% rise in sales.

However, price rises and soaring wage costs will weigh on its store chain earnings over the year ahead, pencilling in profit to fall by around 12% to £180 million, with sales expected to fall 2%.

The group is also appealing against a decision last year that saw more than 3,500 former and current workers at the group win their equal pay claim after a six-year legal battle. An employment tribunal ruled that Next failed to demonstrate that the lower basic wage paid to sales consultants compared with warehouse operatives was not the result of sex discrimination. The case is set to go to court in the early summer.

NEXT has cautioned if upheld, it could be forced to shut shops due to soaring costs, but said on Thursday it remains "very confident of our grounds for appeal".

"We expect the appeals process to take some time to conclude and therefore we do not expect a final resolution to be reached for at least a year, if not much longer," it added.