Next raises profit guidance following strong first quarter sales

British clothing retailer Next has increased its full year profit guidance to 1.21 billion pounds after full price sales in the first quarter exceeded internal forecasts. Total full price sales for the 13 weeks to May 2, 2026, rose 6.2 percent compared to the previous year, surpassing the 4 percent growth initially anticipated by the group. This overachievement represented 28 million pounds in additional sales, contributing 8 million pounds to the revised profit outlook.

The performance was bolstered by a significant 11.8 percent surge in sales during the first five weeks of the year. While the conflict in the Middle East caused subsequent disruption, trade began to recover in the final five weeks of the period as delivery services returned to normal.

Performance across business divisions

The group saw varied growth across its operational segments, with international and online channels leading the expansion. Total online international sales grew by 12.8 percent, while the UK online division saw a 10.1 percent increase. Within the UK online segment, the Label business was a particular highlight, posting a 15.7 percent rise in full price sales.

Retail stores in the UK recorded a more modest growth of 3.4 percent. When combined with online operations, total UK sales rose by 4.4 percent. Despite the strong start, the company is maintaining its full price sales guidance for the remainder of the financial year.

Impact of Middle East conflict

Next has updated its assessment of the ongoing disruption caused by the conflict in the Middle East. The retailer now estimates total cost increases of 47 million pounds for the full year, up from a previous forecast of 15 million pounds. These costs include outbound delivery to international territories and inbound bulk freight to the UK, alongside rising energy and fuel expenses within UK operations.

To maintain its profit margins, the group has implemented a series of mitigation strategies. Overseas price increases, particularly in territories outside of Europe, will be introduced in May but are capped at 8 percent. In Europe, currency gains have offset the need for price adjustments.

In the UK, Next does not anticipate increasing prices beyond the 0.6 percent forecast at the start of the year. Instead, the company is leveraging better than expected factory gate prices and operational cost savings to absorb the 27 million pounds in additional UK-related costs.

Outlook and shareholder returns

The group expects sales growth to moderate in the second half of the year, particularly from August onwards. This is attributed to a tough comparative period in 2025, when the business achieved a step change in European aggregator sales through the adoption of Zeos distribution services.

The company plans to complete 510 million pounds of share buybacks this year, provided they achieve a minimum 8 percent equivalent rate of return (ERR). To date, Next has purchased 196 million pounds of shares at an average price of 126.52 pounds.

The next scheduled trading update, covering the first 26 weeks of the year, is set for August 5, 2026.