Clothing and homeware retailer Next expects annual profits to increase to £1.15bn, up £15m on previous guidance, following strong Christmas sales, while warning that trading conditions in 2026 are likely to be much tougher.

In its Trading Statement, released today (6 January), the business reported full-price sales rose 10.6% year on year, ahead of its +7% guidance for the quarter, in the nine weeks to 27 December.

During the period, UK sales increased 5.9%, compared with prior guidance of +4%, with Next noting that sales benefited from higher stock availability than last year, when supplier deliveries were delayed by disruption in Bangladesh and global freight networks.

International sales rose 38%, significantly ahead of anticipated growth of 24%. The retailer attributed this overperformance to increased marketing investment and stronger sales through its partnership with with the online specialist Zalando.

The business transitioned to ZEOS, Zalando’s B2B unit, in August, which Next said improved stock availability by allowing a single inventory pool to serve both the Zalando and NEXT websites across Europe. Marks & Spencer also recently announced it had signed a partnership agreement with ZEOS to scale its online business in Europe.

Sales for the year to the end of January are expected to rise 10.7% to £5.6bn, with pre-tax profits forecast to increase 13.7%. 

However, Next cautioned that growth in the next financial year is expected to slow to 4.5%, partly reflecting toucher comparatives, as this year’s performance benefited from a hot, sunny summer and significant disruption at rival M&S following a cyber attack.

The retailer also warned that “continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses.”