Next Sees Record Christmas Sales, Boosting Full-Year Forecasts

Next has released its Christmas trading statement, revealing a strong performance that exceeded expectations. The company once again surpassed its guidance, demonstrating continued positive momentum.

During the nine weeks to December 27th, full-price sales increased by 10.6% year-on-year, significantly higher than the previously projected 7% growth. This success was driven by a robust performance in international markets, with sales up 38.3%, while UK sales also showed a healthy increase of 5.9%.

It’s important to note that full-price sales encompass retail store sales, webstore sales (including third-party brands), and finance interest income, excluding sale events, clearance, Total Platform commission, and subsidiary sales. This strong performance, coupled with anticipated sales in January, adds £51 million to the company’s full-price sales forecast.

As a result, Next is increasing its full-year profit before tax guidance by £15 million to £1.15 billion, representing a projected increase of 13.7%. The company expressed optimism, while maintaining its typically cautious approach to forecasting.

Looking ahead to the financial year ending January 2027, Next anticipates full-price sales growth of 4.5%, total group sales growth of 4.2% (including markdowns), and a group profit before tax of £1.202 billion, a 4.5% increase.

A closer examination of the recent quarter reveals that full-price sales for the Next brand online in the UK rose by 8.8% during the nine weeks to December 27th. This represents an acceleration compared to the 5.8% rise in the first nine months and 6.5% in the 48 weeks leading up to December 27th.

UK Online Label sales increased by 9.5% over the same period, slightly below the 12.7% growth seen in the first nine months and 11.9% in the 48 weeks. Overall, UK online sales rose 9.1% in Q4 to date, exceeding the 8.7% and 8.8% growth recorded in the nine months and 48 weeks respectively.

In contrast, retail store sales saw more modest growth, with figures of 1.4%, 4.3%, and 3.5% for the three periods, suggesting a consumer preference for online shopping during the festive season. Total UK sales increased by 5.9% for Q4 to date, 6.8% for the nine months, and 6.6% for the 48 weeks, indicating a slight slowdown in UK growth in the latest quarter.

The international online performance was particularly impressive, accelerating to a 38.3% increase, surpassing the 31.5% growth in the first nine months and 33% in the 48 weeks. Total full-price product sales across the business rose by 11.1% in Q4, slightly below the 11.5% and 11.4% growth seen in the nine months and year-to-date respectively.

Next attributes some of its success to the challenges faced by competitor Marks & Spencer following a cyberattack that disrupted its online operations. While UK growth slowed after M&S restored its services, the impact was less significant than initially anticipated.

UK growth of 5.9% exceeded the previous guidance of 4.1%, benefiting from higher stock levels due to improved supplier deliveries, resolving earlier disruptions in Bangladesh and global freight networks. The international surge significantly outperformed expectations, reaching 38.3% compared to the projected 24.3%.

This international success was driven by increased profitable marketing expenditure and stronger-than-expected sales through Zalando, Next’s main European aggregator, following the transition to Zalando’s ZEOS platform in August. This transition improved stock availability by allowing shared stock-holding across both platforms.

The company also noted a higher volume of stock in its end-of-season sale, up 5% year-on-year. However, the negative impact of discounted sales was offset by better-than-expected clearance rates, resulting in a net positive effect of £30 million on total group sales, although this was “profit neutral”.

Revised guidance for the full 2025/26 year projects total group sales growth of 10.3%, up from the previously expected 8.7%. The anticipated 13.7% increase in profit before tax is also expected to exceed the earlier forecast of 12.2%.

Looking further ahead to the 2026/27 financial year, the expected 4.5% increase in full-price sales represents a significant slowdown compared to the 10.7% growth anticipated in the current year. This moderation is attributed to favorable conditions experienced this year, including the M&S disruption and beneficial summer weather.

Additionally, Next anticipates continued pressure on UK employment, impacting economic activity, and expects growth from its overseas direct websites to moderate from the exceptional levels achieved this year.