Next has upgraded its annual profit forecast to more than £1.1bn following stronger-than-expected sales over the Christmas period, although the retailer has warned that growth is likely to slow in the year ahead amid ongoing pressure on UK employment.

The clothing and homewares retailer said it had raised its annual profit outlook by £15m — its fourth upgrade in eight months — after UK sales rose 5.9% in the nine weeks to 27 December, well ahead of the 4.1% increase it had forecast.

Next said the improved performance was supported by higher stock availability compared with the previous year, when deliveries were disrupted by supply chain issues in Bangladesh. The company also reported a better-than-expected end-of-year sale, with sales coming in £30m above expectations.

For the year to the end of January, Next now expects total sales to rise 10.7% to £5.6bn, with pre-tax profits up 13.7% to £1.15bn. This compares with its previous forecast of 9.7% sales growth and pre-tax profits of £1.14bn.

Overseas sales also exceeded expectations, rising 38% compared with the 24% growth previously forecast. Next said the uplift was driven by increased marketing spend and higher sales through its partnership with online fashion platform Zalando.

The strong festive performance offers some encouragement for UK fashion and homewares retailers, many of which were expected to face a challenging Christmas trading period following an unseasonably warm autumn and continued pressure on household budgets. However, recent industry data has painted a more cautious picture, with Worldpanel by Numerator reporting a 1.4% fall in UK fashion sales in the four weeks to 7 December.

Concerns for the wider retail sector have also been heightened after Claire’s and The Original Factory Shop — both owned by Modella Capital — said this week that they were close to calling in administrators.

Despite its strong results, Next cautioned that growth in the next financial year is expected to slow to 4.5%, citing “continuing pressures on UK employment” that are likely to weigh on consumer spending. The retailer also noted that several one-off factors had boosted performance in 2025, including a very sunny summer and the temporary online shutdown of rival Marks & Spencer following a cyber-attack.

Next added that growth from its overseas direct websites is expected to moderate as marketing investment stabilises and recent operational changes — which increased product availability to online partners — are largely complete.

Shares in Next rose 2% on Tuesday, making it one of the strongest performers on the FTSE 100 and helping to push the index to a record high.

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