Retail giant Next has cautioned over slowing sales growth in 2025 and said it will need to hike prices due to the impact of recent Budget measures.
The high street bellwether, which has 20 stores in Northern Ireland, said it is facing a £67 million surge in its wage costs in the year to January 2026 – rising to £73 million for a full year’s impact – after the Labour Government announced plans to increase employer national insurance contributions and the minimum wage from April.
It said it will need to push through an “unwelcome” 1% rise in prices as part of efforts to help offset the hit.
Next also warned that sales growth will pull back sharply over the year ahead as the Budget measures – which both take effect in April – are set to hit jobs and send prices rising across the economy.
The group has added to a growing list of firms alerting over price rises to combat cost increases, while the British Chambers of Commerce said earlier this week that more than half of companies are planning to lift prices over the next three months due to cost pressures.
Next’s warning came as the firm reported a better-than-expected 5.7% rise in underlying full-price sales for its fourth quarter so far, and upped its full-year pre-tax profit outlook once again, pencilling in a 10% jump to £1.010 billion.
This compares with previous guidance for a 9.5% rise to £1.005 billion, helping shares lift 2%.
But over the new financial year to January 2026, it expects sales growth to slow to 3.5% and for group profits to increase by a more muted 3.6% to £1.05 billion.
Next said: “We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.”
Chief executive and Conservative peer Lord Simon Wolfson said that consumer confidence is likely to be dented later in the year as the full effects of the Budget measures are felt by firms.
He told the PA news agency that employers with part-time and low wage workers will be disproportionately affected by the moves, as costs will rise more steeply for these employees.
“We’re not looking at a dramatic increase in unemployment but… it’s these jobs that are most likely to be lost in the economy,” he said.
He stressed that for Next, it was “not a meltdown situation”.
“The cost increases are serious, but with a combination of price increases, efficiencies and cost savings, we can still grow profits in line with sales,” he added.
The group also warned that overseas sales growth – which had surged to 24% in 2024-25 – will fall back as it reins in marketing spend after investing heavily in this over the past year.
“We do not believe we can profitably increase our overseas marketing expenditure by the same percentage next year, and expect the growth to be closer to 20%,” it said.
The firm said an expected 1% increase in prices will offset around £13 million of its higher wage bill.
It will also look to make further savings of £23 million in the face of the cost increase, with measures also including “improved working practices and other operational efficiencies in our warehouses, distribution networks and stores”.
Lord Wolfson said Next would not be cutting jobs through redundancies, but confirmed it would take on fewer workers than normal in the year ahead across its warehouses and retail stores.
Some of this will come as it brings on stream more high-tech warehouses, while it will also not replace some workers when they leave. Lord Wolfson stressed that its overall employee numbers will not fall.
“We’re not in a situation where we’re having to cut numbers, but we’ll take on fewer people than we would have done,” he told PA.
