Anticipated Disclosure of Profit Boost amid Tariff Complexities
Fresh Take:
Next is gearing up to reveal some positives next week, bucking the trend of cost increases hitting retailers and dwindling UK consumer confidence. The retail titan, boasting over 450 stores nationwide, is expected to post its Q1 results on May 8, building upon last year's profits of over £1bn.
In the previous fiscal year, Next chalked up pre-tax profits of £1.01bn, a 10% hike compared to the year before. Lord Simon Wolfson, the boss, hinted at a promising start to the current financial year during the recent update. In response, Next upped its guidance for 2025-26, predicting sales growth of 5% to £5.3bn and profits escalating by 5.4% to £1.07bn.
However, Next, like other retailers, has been battling a string of cost increases since the full-year results were posted in March. The rise in National insurance contributions (Nics) and the minimum wage in April, coupled with a dip in UK consumer confidence, have added to the challenges. Consumer confidence has plummeted to its lowest level in over a year, fueled by fears that Donald Trump's trade tariffs might jack up living costs.
Next, being an active player in the online US market, could also experience a ripple effect from Mr. Trump's tariffs on sales. According to Russ Mould, an analyst at AJ Bell, Next has showcased a "freakish knack" of surpassing expectations, as demonstrated in March when Chief Executive Simon Wolfson raised expectations for full-price sales and pre-tax profits for the year to January 2026.
Marks & Spencer and Harrods have recently become victims of a series of cyber attacks plaguing UK retailers. As of Friday morning, M&S was unable to process online orders following a "cyber incident." While Next hasn't been directly affected, the cyber threat is an additional worry on their plate.
Shares for Next have grown by 27% for the year-to-date as of Friday, propelled by investor confidence in the company’s ability to meet expectations amid broader market volatility. Next has already stated that it will increase prices by approximately 1% to compensate for the effect of Nics and minimum wage increments.
By Alex Daniel, PA Business Reporter
InsightNEXT's upcoming Q1 results are set against the backdrop of economic pressures like increased National Insurance Contributions, minimum wage hikes, and declining consumer confidence. The retailer's substantial workforce (approximately 40,000 employees) and online market presence (currently accounting for around 58% of sales) make it sensitive to changes in disposable income and consumer spending patterns. The company's adaptability to cost pressures, as suggested by strong performance from industry peers such as Shell and Allegion, will be crucial. Key metrics to watch include gross margin, online growth rates, and any changes to full-year profit before tax forecasts.
- Next, with its workforce of approximately 40,000 and online market presence accounting for around 58% of sales, is exposed to changes in disposable income and consumer spending patterns in the UK economy.
- The retailer's strong performance in the past, similar to that of industry peers like Shell and Allegion, suggests its adaptability to cost pressures, which is key amid the increasing National Insurance Contributions, minimum wage hikes, and declining consumer confidence.
- The upcoming Q1 results for Next, set against these economic pressures, will provide insight into their ability to navigate these challenges and maintain profitability.
- As Next prepares to increase prices by approximately 1% to compensate for the effect of National Insurance Contributions and minimum wage increments, investors will be closely watching the company's gross margin and online growth rates.
- Any changes to the full-year profit before tax forecasts for Next, in light of these economic pressures, will be a significant indicator of the retailer's financial health and prospects for the remainder of 2025.
