Next Surges Ahead With Strong Sales Growth Benefiting From M&S Cyberattack

Next has recently unveiled its latest financial report, showcasing the robust strength of its rapidly expanding UK-based retail operations and highlighting the notable benefit it reaped from M&S's cyberattack-related challenges earlier this year. While an upbeat Q2 trading statement in late July had set expectations, Thursday's confirmed figures provided extensive additional detail, underscoring the company's impressive performance.

Delving into the financial specifics, full-price sales at Next climbed by a significant 10.9%. Including markdowns and contributions from subsidiaries, total group sales saw a 10.3% increase, reaching £3.249 billion. Statutory revenue also rose by 9.9% to £3.145 billion. Profitability soared, with group profit before tax up 13.8% to £515 million, and statutory profit before tax jumping an even more impressive 17.8% to £509 million. The group's profit after tax increased by 13.4%, arriving at £387 million.

Looking ahead to the year ending January 2026, Next anticipates full-price sales growth of 7.5%. This projection implies a 4.5% year-on-year growth in the second half, a more conservative figure than the first half's performance. This cautious outlook is attributed to potentially less favourable weather conditions in the latter half of the year and M&S's expected return to full operational strength following its cyberattack. Despite these factors, Next's pre-tax profit for the full year is expected to reach £1.105 billion, representing a 9.3% increase and remaining consistent with previous guidance.

A granular look at the UK market reveals varied performance across divisions. For the UK Retail division (stores), full-price sales growth was 5% year-on-year for the Next brand itself. Wholly-Owned Brands and Licenses (WOBL), which constitute a smaller 7% of H1 sales, remained flat in-store, but third-party brands showed remarkable growth, up 24%. Online, Next brand sales in the UK grew by 7%, WOBL by 15%, and third-party brands by 12%, combining for a total online increase of 9%. When considering both Retail and Online together for the UK, total full-price sales rose by 6% for the Next brand, while WOBL and third-party brands each surged by 13%, leading to an overall combined increase of 8%.

Internationally, Next's growth was even more pronounced. Next brand sales on International websites expanded by 20%, WOBL by a robust 47%, and third-party brands by 45%, culminating in a 26% total increase for these sites. Sales through International third-party aggregators saw the Next brand grow by 21%, and WOBL by an astounding 325%, contributing to an overall 33% increase in this channel. Cumulatively, total International sales for the Next brand rose by 20%, WOBL by 96%, and third-party brands by 45%, resulting in an impressive 28% overall international sales increase. Combining both UK and International performance, Next brand full-price sales grew by 9%, WOBL by 33%, and third-party brands by 16%, culminating in an overall combined full-price sales increase of 11.6%.

The WOBL portfolio is diverse, featuring popular brands such as Cath Kidston, Lipsy, Laura Ashley, Bath & Body Works, Seraphine, and FatFace, among others. The third-party branded business, which includes non-Next brands like Nike, Whistles, and Boden, had an exceptionally strong season, contributing a fifth of group sales and over a quarter of its growth. Next manages this segment either by purchasing brands at wholesale prices or by selling them on a commission basis. This strategy is also aiding Next in its move upmarket; last autumn, it launched its higher-end Seasons webstore, showcasing luxury brands like Coach, Tory Burch, and Polo Ralph Lauren. While Seasons is still in its nascent stages and expected to take years to scale, Next sees its potential mirroring that of its wholly-owned brands and licence businesses, promising access to new markets and future growth if executed effectively.

New markets and growth are also central to Next's international expansion strategy, with aggregators playing a pivotal role. The company has forged new aggregator partnerships with platforms such as About You (Europe), Amazon (across France, Italy, Spain, and Germany), and Nordstrom (US). Sales through Amazon have exceeded expectations, though currently limited to basic and essential products. For the second half of the year, Next plans to commence trading with a new European aggregator and extend its Amazon presence to the Netherlands and Belgium. By the first half of 2026, it aims to launch with at least one major Asian aggregator. Over half of its growth with existing aggregators stemmed from the integration of wholly-owned brands and licensed products, a promising sign for the WOBL business. Next believes the greatest opportunity with existing aggregators lies in enhancing the breadth and availability of its product offerings. The outsourcing deal with Zalando is crucial, as Next is consolidating its European warehousing with Zalando's ZEOS division. This consolidation will allow Next's own EU websites to draw from the same stock pool as its Zalando business, significantly boosting stock availability on Zalando’s platforms.

In an unusually enthusiastic statement for Next, the company attributed its impressive results to a "palpable increase in creative energy" within its product departments. This renewed vigour is driving the delivery of newness and elevating quality to exceed customer expectations across all price points. This creative energy also extends to the development of its expanding portfolio of new brands, licences, and third-party brands, as well as to the "ingenuity" of the teams developing its online platform. While acknowledging that such statements might sound "gushing," especially given the favourable weather and M&S's disruption, Next assured observers that its "enthusiasm for its many opportunities is grounded in a cautious realism."

This caution includes a belief that the medium-to-long-term outlook for the UK economy remains unfavourable, though Next does not foresee an imminent "cliff edge." Instead, it anticipates "anaemic growth" for the national economy. Nevertheless, the company remains confident that its own business is well-positioned, a sentiment that its recent robust results strongly support.