Next enjoys stellar festive period but warns of slower UK growth amid tax hikes

Retail giant Next has posted stellar Christmas trading figures after “over-achieving” during the festive period.

Full-price sales at the Enderby firm rose by 6% in the nine weeks to December 28 – a performance that added £27m to full price sales and will increase profits to £1.01bn for the year ending January 2025.

Next is expecting profits for its full-year 2026 to be even higher – up 3.6% to almost £1.05bn.

Charlie Huggins, Next shareholder and manager of the “Quality Shares Portfolio” at Wealth Club, said: “Next has enjoyed a strong Christmas with its online business seeing an acceleration in sales growth in the fourth quarter, both in the UK and overseas. The year ahead is forecast to be more challenging, but Next still expects to grow sales and profit. It is a classic example of a strong business getting stronger.”

This morning’s (January 7) figures are all the more impressive in the wake of the latest British Retail Consortium report showing that overall total UK footfall in 2024 was down 2.2% compared to 2023.

However, Next has warned that its growth in the UK is set to slow down, due to the impact of tax rises announced in last year’s Budget.

With the tax hikes, Next is looking to combat an “unusually high” £67m increase in wage costs through a 1% increase in prices on like-for-like goods which it calls an “unwelcome” move, but is “still lower than UK general inflation”. It expects the hike will offset around £13m of wage costs.

The Enderby-based group believes it can also make operational savings of around £23m through “improved working practices and other operational efficiencies in our warehouses, distribution networks and stores”.

Huggins added: “Next has pulled another rabbit out of the hat this Christmas, beating its sales forecasts once again. More important for investors is the guidance for the coming year.

“Calendar year 2025 is likely to be a bloodbath for the UK retail sector. The Autumn Budget means retailers will face a significant increase in employee costs and many will not be able to offset this. Next stands apart for its ability to do so, with its high margins, strong overseas growth and efficiency initiatives all helping it to preserve profitability.

“Next has also warned it will need to put up prices in the year ahead. Many other retailers are likely to follow suit. This is likely to add to inflationary pressures and could encourage consumers to tighten their belts in 2025.”