Next Raises Annual Profit Forecast Amid Strong Christmas Trading
Next, a prominent UK retailer, has raised its annual profit forecast, driven by a successful Christmas trading period. The company is capitalizing on another quarter of robust sales growth, which has positively impacted its financial outlook.
In a positive development for shareholders, Next announced that it will distribute a special dividend of £3.10 per share to investors in early 2026. This move reflects the company's strong financial position and confidence in its performance.
The group has increased its forecasts for full-price sales in the final quarter, raising it from 4.5% to 7%. Sales have exceeded expectations both in the UK and internationally. This marks the fourth time in eight months that Next has updated its full-year profit guidance, highlighting its consistent performance.
Shares in the FTSE 100-listed company saw a 5% increase on Wednesday, extending this year’s gains to 48%. The positive movement follows reports that sales outperformed expectations in both domestic and international markets.
Russ Mould, investment director at AJ Bell, commented: "It is hard to think of a company which has mastered the art of being on the stock market better than Next. The company consistently pitches its guidance conservatively, allowing it to surpass expectations when reporting on trading."
As previously announced, the group's interim dividend of 87p per share will be paid to shareholders on 5 January 2026. The company now expects to report a pre-tax profit of around £1.14 billion for the year ending in January 2026, up from previous guidance.
Third-quarter UK sales rose by 5.4%, with Next attributing the increase to improved stock levels compared to last year, when disruptions in Bangladesh and global freight constraints delayed deliveries. Overseas sales surged by 38.8%, partly due to increased digital marketing spending.
In September, Next had anticipated a weakening UK economy and slower sales growth of 4.5% in the second half of the year. This would have marked a decline from the 10.5% growth recorded in the second quarter, which was aided by favorable weather and a cyberattack at rival Marks & Spencer.
The retailer decided to place more of its surplus stock into its mid-season sale in September rather than its Christmas sale.
Analysts at RBC Europe noted: "Next should benefit from further real wage growth in the UK, albeit it will remain somewhat sensitive to the employment outlook and cost of borrowing for the consumer."
Dan Lane, UK lead analyst at Robinhood, said: "The real story today is the international segment, which is performing exceptionally well. Marketing spend doubled compared to guidance, but when it's generating significant revenues, it shows an efficient, returns-focused strategy. This malleability and quality execution come with being a seasoned player in the sector."
Richard Hunter, head of markets at Interactive Investor, added: "Unsurprisingly, the share price has recognized the singular strength of this slick and well-regarded company. Even before the strong price spike at the open, a rise of 33% over the last year compared to a gain of 18% for the wider FTSE 100 has helped lift the three-year performance to growth of 172%, which is a considerable achievement given the traditional restraints faced by retail stocks."
He continued: "The market consensus of the shares as a strong hold, which has been in place for some time, has missed several opportunities where the naysayers who have doubted the stock’s trajectory may continue to do so at their peril."
Next, led by Lord Wolfson, operates over 800 stores in the UK and Ireland, including Reiss, Joules, and FatFace stores. It also has an online presence in more than 70 countries, selling the Next brand and over 700 other brands.
Next's performance contrasts sharply with many UK retailers struggling with declining sales. This week, The Very Group reported a loss in its latest annual results after writing off a loan owed by the Barclay family’s holding company.
The Very Group posted a pre-tax loss of £505.4 million for the year ending 28 June, down from a £16.3 million profit the previous year. Group sales declined by 1.8% year-on-year to £2.09 billion. However, adjusted EBITDA increased by 15.9% year-on-year to £307.1 million.
Next rival Marks & Spencer is working to boost sales following a cyberattack earlier this year. M&S stated that the attack is expected to reduce operating profits by up to £300 million this year.