Retailer Next has raised its full-year profit forecast for the fourth time this year, crediting warm weather and its own cost discipline for a sales jump that caught even the company by surprise. The FTSE 100 firm, which holds UK rights to Gap and Victoria's Secret and owns stakes in Reiss and Joules, now expects annual profits of £1.26bn, up £12m from its previous guidance.
Group sales rose 9% in the six months to July, pushing pre-tax profits up 11% to £566m. Next runs more than 500 UK stores and said the results beat expectations "despite the strength of sales last year," when it topped £1bn in annual profit for the first time. Warehouse cost cutting also helped, the company said.
Next struck a cautious note on what comes next. It flagged rising inflation, higher mortgage costs and a weak jobs market as its main worries, adding that tax increases would make things worse, an apparent nod to the government's budget on 28 October. "It seems likely that it will have to increase taxes in order to fund its expenditure," the company said.
On AI, Next said it's expanding use of the technology across its business but keeping humans in charge of fashion design. It argued shoppers still prefer "the authentic creativity of human beings" and is investing more in designers who work directly with paint, pencils and screen printing rather than software tools. Shares rose 2% on Thursday, making Next the top gainer on the FTSE 100.
A strong summer for a giant like Next suggests consumer appetite for clothing hasn't cracked yet, but Next's own warnings about inflation, mortgage costs and possible tax rises apply just as much, if not more, to businesses with thinner margins and less pricing power. Independent retailers watching for autumn price rises should treat Next's caution as an early signal, and its emphasis on human-led design over pure automation is a reminder that AI cost savings and brand differentiation aren't always the same thing.