- Warm weather boosts Q1 takings
- PBT guidance lifted by £14 million
- M&S’ troubles a potential tailwind
Despite the pressures facing the retail sector, fashion-to-homewares purveyor Next (NXT) hiked profit guidance again after warm spring weather stoked stronger-than-expected sales in the first quarter, sending the shares up 1.1% to £124.30.
Guided by CEO Simon Wolfson, the retail star turn upgraded its year-to-January 2026 pre-tax profit guidance by £14 million to £1.08 billion, implying robust year-on-year growth of 6.8%.
However, the notoriously conservative company refrained from upgrading sales guidance for the rest of the year, since management believes some of the first-quarter outperformance will have pulled forward sales of summer ranges from the second quarter.
£55 MILLION BEAT
Next’s full price sales grew 11.4% in the first quarter to 26 April 2025, £55 million ahead of the company’s previous guidance.
The FTSE 100 clothing colossus called out warmer weather as one of the key drivers of this outstanding performance, with rising temperatures benefiting sales of summer ranges.
‘Our performance in both the UK and overseas was better than we had anticipated,’ explained Next. ‘Sales in our Retail shops have been much stronger than we expected but, in our experience, shops benefit disproportionately from the favourable weather. So we are expecting our Retail sales to return to being broadly flat for the rest of the year.’
Given the meteorological boost to first-quarter sales and the risk that some of these sales have been pulled forward from the second quarter, Next is taking a conservative view of sales for the rest of the year.
The company reiterated its cautious outlook on second half sales, highlighting much tougher prior year comparatives and its belief that ‘the full effects of this April’s National Insurance increases will begin to filter through to the wider economy in the second half’.
The best-in-class retailer is pausing share buybacks for now, as its current share price exceeds minimum return thresholds, with special dividends likely to replace buybacks if this persists.
TAILWIND FROM RIVAL’S TRAVAILS?
Panmure Liberum said UK LABEL growth of 15.7% is ‘particularly noticeable in a declining UK online fashion market’ and highlights Next’s ‘growing status as the preferred platform for multi-brand fashion. The benefit from Marks & Spencer’s (MKS) cyber-attack (M&S closed online shopping on 25 April) was likely immaterial this quarter but could be a tailwind in 2Q.’
The broker added: ‘Full-year 2026 pre-tax profit guidance has been ticked up slightly to £1,08 billion (from £1,066 billion) in typically conservative manner, and we think there is more to come.’
Julie Palmer, partner at Begbies Traynor (BEG:AIM), warned that in spite of the positives, Next’s caution over the coming months is ‘telling. After a very healthy first quarter, the retail giant has maintained sales guidance for Q2 and only nudged up profit before tax guidance for the full year by £14 million.
‘In an environment where headwinds are gathering, everyone is feeling cautious. UK consumer confidence is at its lowest since 2022, with persistent cost pressures and US tariffs adding to the uncertainty,’ explained Palmer.
‘Next’s scale gives it an advantage, but sustaining this level of outperformance will be harder if conditions worsen. That said, Next has under promised and over delivered for years so there’s plenty of scope for more surprises to the upside at the next update.’
