Next Warns of Sales and Profit Slowdown in 2025 Amid Rising Costs

Next, a well-known retailer in the UK, has issued a warning about an anticipated slowdown in both sales and profit for 2025, attributing this decline to a financially burdensome Budget. The company plans to raise clothing prices as a measure to counteract a substantial £73 million surge in staff wages and taxes. This information follows an announcement from Chancellor Rachel Reeves regarding an increase in employer national insurance contributions and a reduction in the earnings threshold for payments.

Next highlighted that the combination of a higher national living wage and rising tax obligations is predicted to cost them £67 million in the current financial year. While the price hikes are deemed "unwelcome," they are expected to mitigate roughly £13 million in wage and tax expenses. With 458 retail locations across the UK, Next is set to face significant challenges ahead, as the FTSE 100 has noted that increased employer taxes may impede sales growth.

The retailer has revised its sales and profit growth forecasts for the upcoming financial year, projecting a steep decline from the previous year's figures. For the next financial year, Next anticipates UK full-price sales growth at just 1.4%, a fall from 2.5%. The forecast for profit growth looks even bleaker, with only a predicted increase of 3.6% for the year ending in January 2026, down from an estimated 10% the prior year.

Next specifically pointed out the substantial impact of the Chancellor's decision to lower the national insurance contribution threshold from £9,000 to £5,000, which alone accounts for £20 million in costs. Nevertheless, even amidst predictions of a tough year ahead, the retailer experienced a positive turn, with an impressive 6% increase in full-price sales during the nine weeks leading to December 28. This performance surpassed their guidance, and as a result, they expect to report a pre-tax profit exceeding £1 billion for the fiscal year ending in January.