Next Share Price Gains as Profit Guidance Raised But Retailer Warns ‘UK Growth is Likely to Slow’

Next plc (LON: NXT) shares jumped over 3% at the open on Tuesday after the retailer raised its full-year profit forecast, crediting strong Christmas trading.

However, the company cautioned that UK growth may slow in the coming year due to rising taxes and economic pressures.

In the nine weeks to 28 December 2024, Next posted a 6% increase in full-price sales compared to the previous year. This was slightly boosted by the timing of their end-of-season sale. Adjusted underlying sales rose by 5.7%, surpassing the previous guidance of 3.5% growth.

The outperformance resulted in Next increasing its full-year profit before tax guidance by £5 million to £1.01 billion, marking a 10% rise from the previous year. Earnings per share (EPS) are expected to grow by 11.4%.

Looking ahead, Next sees a growth rate of 3.5% in full-price sales for the year ending January 2026, with pre-tax profit seen at £1.046 billion, a 3.6% increase.

However, the company warned of slower UK growth as employer tax increases potentially affect prices and employment.

“We have been cautious in our outlook for both the UK and overseas,” said the retailer. “We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.”

In addition, the company highlights a rise in wage costs due to a combination of general wage inflation, the increase in the National Living Wage (NLW), the decrease in the Employer National Insurance (ENI) threshold, and the increase in the ENI headline rate.

The company added that the “unusually high £67 million increase in wage costs” can be offset through a combination of operational efficiencies and other cost savings, and a one percent increase in prices on like-for-like goods.