Next, the UK fashion retailer, reported a 13.8% rise in pre-tax profits to £515 million for the six months ending in July, with group sales up 10.3% to £3.25 billion. Despite these strong interim figures, Next's shares fell 6% on Thursday. The company also maintained its upgraded full-year profit guidance, expecting group sales to increase by 7.5% and profits to reach £1.11 billion.
Chief Executive Lord Wolfson, a Conservative peer, expressed caution about the UK's economic future, predicting "anaemic growth" rather than a recessionary "cliff edge." He attributed this pessimistic outlook to four key factors: declining job opportunities, new regulations that hinder competitiveness, government spending commitments beyond its means, and a rising tax burden that negatively impacts national productivity. He highlighted that vacancies at Next have fallen by 35% over the past two years, while applications have surged by 76%.
The strong first-half performance was partly attributed to unusually warm weather, which boosted summer clothing sales, and disruptions at rival Marks & Spencer due to a cyberattack. However, Next anticipates a significant slowdown in sales growth for the second half of the financial year, projecting only 1.9% growth compared to 7.6% in the first half. The company expects in-store sales to decline by 0.6% and online growth to more than halve to 3.6%.
Lord Wolfson also criticized the government's policies, including increased National Insurance Contributions and the minimum wage, which he believes are leading to a sharp drop in vacancies and making it harder for people, especially young workers, to find employment. He warned that additional tax rises would have a further "demonstrable negative impact on the economy" and dampen consumer spending in the latter half of the year. Retail analysts like Natalie Berg acknowledged Next's resilience but noted that the company is not immune to the "tsunami of costs" affecting the sector.
