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Next warned that its sales and profit growth would slow this year as tax increases in the UK budget hit one of the country’s biggest retailers and the economy as a whole.
The FTSE 100 index on Tuesday exposed the impact of the October Budget, when Chancellor Rachel Reeves increased the amount of employers’ national insurance contributions and also lowered the income threshold at which they start paying them. pay.
The measures, along with an increase in the national living wage and general wage inflation, would cost it £67 million in the current financial year, Next said, while warning of the potentially chilling effect on employment. economy as a whole.
“Tax increases on employers and their potential impact on prices and employment” would start to impact its sales growth, according to Next, which has 458 stores in the UK.
It expects UK full-price sales to grow by 1.4 per cent in the next financial year, compared to 2.5 per cent in the 12 months to December 28.
The retailer expects profit growth of 3.6 percent for the year to January 2026, compared to an estimate of 10 percent for the 12 months to January 2025.
Despite Next’s caution for the year ahead, the retailer’s sales during the key Christmas period exceeded the group’s forecasts.
Next’s full-price sales rose 6 percent in the nine weeks to December 28, or 5.7 percent excluding the impact of the different timing of its end-of-season sales compared to previous year.
The figures beat Next’s previous forecast of a 3.5 per cent increase on the previous year and will push the chain’s pre-tax profit to just over £1bn for the year until January.
Shares of Next rose 2.7 percent in early trading.
Following said the chancellor’s decision to lower the income threshold at which businesses start paying NI contributions from £9,000 to £5,000 was one of the biggest costs, totaling £20 million.
The company said it would attempt to offset these “unusually high” costs through operational efficiencies and a 1 percent price increase, “which is not welcome, but remains below target.” UK general inflation.
In a survey of 5,000 businesses by the British Chambers of Commerce this week, around 55 percent of businesses said they planned to increase prices in the next three months.
Richard Chamberlain, retail analyst at RBC Capital Markets, said he believed Next would benefit from “further UK real wage growth, although it will remain somewhat sensitive to the outlook for the cost of borrowing for the consumer.”
