Next PLC (LSE:NXT) delivered another strong Christmas performance, reinforcing its reputation for disciplined execution, but analysts at Shore Capital warn that tougher conditions at home could make further upgrades harder to come by.
Full-price sales rose 10.6% in the nine weeks to 27 December, comfortably ahead of management’s 7% guidance.
As has become a familiar pattern, the standout driver was international online, where sales surged more than 38%, building on already strong year-to-date growth.
By contrast, UK trading slowed over the festive period, but not as sharply as feared, with sales up 5.9%.
Shore Capital, which is highly rated in the retail sector, points to the continued importance of growth engines beyond the traditional store estate.
Third-party brands sold through Next’s LABEL platform and international online remain the main contributors to earnings momentum, offsetting slower growth in the more mature UK retail business.
That mix, the broker argues, underpins confidence in the longer-term shape of the group.
The strong Christmas showing prompted another nudge higher to profit expectations for the current year. Adjusted profit before tax is now guided to £1.15 billion on a 52-week basis, slightly ahead of both ShoreCap and wider market forecasts.
With this financial year including a 53rd trading week, reported profits will ultimately be higher still.
However, the tone on the outlook remains cautious. Lord Wolfson reiterated concerns about pressure on UK employment filtering through to consumer demand as 2026 progresses.
ShoreCap highlights a challenging backdrop: tough year-on-year comparisons after an unusually strong spring last year, rising labour costs following the increase in the National Living Wage, subdued consumer confidence and a gradual rise in unemployment.
There were also some operational wrinkles. Stock levels going into the end-of-season sale were higher than expected, though better clearance rates meant the impact was profit-neutral while lifting total sales guidance.
Looking ahead, ShoreCap expects growth to moderate in the next financial year, particularly in the UK, and believes the pace of upgrades seen over the past two years is unlikely to be repeated.
While shareholder returns remain attractive, with substantial cash distributions planned, the broker is content to sit on a hold rating given the valuation premium and uncertain domestic outlook. The shares were up 2% at 13,895p.