- First-half profit beat
- UK sales growth to slow
- Full-year guidance unchanged
Shares in Next (NXT) cheapened 5.2% to £114 on the absence of another profit upgrade from the best-in-class British retailer, which has already hiked year-to-January 2026 guidance three times so far this financial year.
Also spooking the market was the Simon Wolfson-led retailer’s warning that UK sales growth will slow in the second half, with Next striking a more cautious tone on UK employment levels and acknowledging the one-off first-half boost from cyber disruption at Marks & Spencer (MKS).
However, Next has got under-promising and over-delivering down to a fine art and as Russ Mould, investment director at AJ Bell, pointed out: ‘While its share price fell on the latest update, Next may not mind a little heat coming out of the stock too much given it had been trading close to recent all-time highs. The group is clearly looking to give itself an easier bar to clear in the coming months by leaving full-year guidance unchanged despite the first-half beat.’
IMPRESSIVE FIRST HALF
Cautious guidance took the shine off strong results for the half to July from the fashion-to-homewares giant, with pre-tax profits powering 13.8% higher to £515 million on full-price sales up 10.9%.
Next kept its year-to-January 2026 guidance unchanged, with full-year pre-tax profit expected to grow 9.3% to just shy of £1.11 billion, but warned UK sales growth would slow from 7.6% in the first half to just 1.9% in the second half.
‘We expect UK employment opportunities to continue to diminish as we enter the second half, with the effects of April’s national insurance changes continuing to filter through into the economy as the year progresses,’ explained Next. ‘We believe that this will increasingly dampen consumer spending.’
The company also warned the medium to long-term outlook for the UK economy ‘does not look favourable’, pointing to declining job opportunities, new regulation that erodes competitiveness and rising taxes.
Nevertheless, Next remains ‘in a good place’ with ‘multiple opportunities for growth, both in the UK and overseas’.
LEVERS TO PULL
‘Today’s lack of an ulterior full-year guidance upgrade (with a tougher UK macro outlook and the non-repetition of first half one-off tailwinds being called out) may be a consideration for short term price action,’ explained Jefferies.
‘And yet the ongoing strength of Next’s domestic platform growth and the group’s dynamic international expansion may prove, in the longer run, an effective offset to the risk of growing investor concerns around the UK macro outlook.’
Begbies Traynor’s (BEG:AIM) Julie Palmer said: ‘Next is clearly concerned about the UK’s economic outlook, but after spending years building an international presence, it has more than one lever to pull on to deliver growth these days which is reassuring for its long-term prospects.
‘Indeed, in the current climate it is no surprise the FTSE 100 retailer has chosen to leave its full-year guidance unchanged. The prospect of tax rises stemming from the Budget and the later-than-usual timing will only add to the uncertainty but could give the retailer some time to highlight where it needs help.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
