Next PLC (LSE:NXT) shares jumped 6% on Thursday morning after the clothing retailer reported a jump in annual profits, but warned that the conflict in the Middle East could push up costs and dampen sales growth in the year ahead.
Pre-tax profit rose 14.5% to £1.158 billion in the year to January 2026, in line with its latest upgraded guidance that month, as total group sales grew 10.8% to £7 billion.
After returning £839 million to shareholders during the year through dividends, share buybacks, and a capital distribution scheme, the board has proposed a final ordinary dividend of 181p per share, taking the full-year total to 268p, up from 233p a year earlier.
Next said it anticipates returning £500 million of cash to shareholders through share buybacks, special dividends or capital returns in the current year.
This is based on expectations that the year will see a pre-tax profit of £1.21 billion, up 4.5%, with full-price sales growth forecast at the same rate.
However, Next flagged the Middle East conflict as a near-term risk, noting the region accounts for around 6% of its total turnover.
The company said it had set aside £15 million to cover likely additional costs such as higher fuel and air freight bills over the next three months, though it added the figure was offset by savings elsewhere and would not affect its profit guidance.
A longer conflict would be likely to result in the company looking to pass costs on through higher prices.
The shares climbed 755p to 12,790p in early trading, reclaiming some of the 9% drop seen since the start of the war in Iran.
Broker Peel Hunt said the final results "confirmed a particularly strong year for the group", with growth "delivered across all fronts, including retail, online, and wholly owned licenses and brands".
The guidance for the new year is largely unchanged from January, it was noted, with accelerating warehouse investment plans to increase capacity given recent growth rates.
The Middle East comments are seen as "measured".
** UPDATE: Adds share price details, broker comments **