High street bellwether Next has delivered a robust Christmas trading performance, prompting it to upgrade its annual profit forecast for a fifth consecutive time. However, the retail giant has simultaneously issued a cautious outlook for the first half of 2026, citing growing pressures in the UK employment sector.
Profit Upgrade Driven by Festive Sales Surge
The company now believes it will achieve a pre-tax profit of £1.15 billion for the year ending 31 January 2026. This figure is £15 million higher than its previous guidance and follows a period of strong consumer activity in the crucial run-up to Christmas.
Next reported that its full-price sales grew by 10.6% in the nine weeks leading up to Christmas, compared to the same period last year. The retailer attributed part of this success to external factors, including a cyber attack on rival Marks and Spencer, very favourable summer weather, and improved stock availability.
Storm Clouds Gather for UK Consumer Spending
Despite the festive cheer, Next's outlook for the coming months is markedly subdued. The company warned it will face a "tough" trading environment in the UK throughout the first half of 2026.
This caution stems directly from concerns over the deteriorating UK jobs market, which is expected to weigh heavily on consumer confidence and disposable income. Official data shows the unemployment rate has risen to 5.1% since the Labour government took office in July 2024, a trend linked to increased employer National Insurance contributions affecting hiring decisions.
Supermarkets Also Enjoy a Record Festive Period
The positive Christmas trend extended to the grocery sector, according to separate industry data. Insights firm Worldpanel by Numerator reported that UK supermarkets experienced a record festive period.
Shoppers spent an average of £476 at supermarkets in December, driving a 3.8% sales increase to £13.8 billion in the four weeks to 28 December. A key driver was unprecedented spending on premium own-brand products, which exceeded £1 billion and featured in 92% of shopping baskets as consumers sought affordable treats.
Deals and promotions also grew in popularity, accounting for 33.3% of all spending – the highest proportion since December 2019. Analysts attributed the sector's boost to slowing inflation, increased use of loyalty schemes, and strategic deal-seeking by shoppers.
Next's robust performance and subsequent warning highlight a stark divide on the UK high street. While some major players capitalise on specific advantages, the broader retail landscape faces significant headwinds. The contrasting fortunes are underscored by the struggles of other chains like Claire's and The Original Factory Shop, which are on the brink of collapse, putting over 2,000 jobs at risk.
