Next raises profit guidance after hitting €1.2bn profit while H&M starts year with weaker sales
The company, whose shares are up 5% so far this year, said full-price sales in the first eight weeks of its 2025/26 year had been ahead of its expectations. Photographer: Chris Ratcliffe/Bloomberg
Next has reported a 10% rise in annual profit, exceeding £1bn (€1.2bn) for the first time, and raised its guidance for sales and profit growth in the new financial year.
Next, which is often considered a gauge of how British consumers are faring, said it made a pretax profit of £1.01bn in its year to January 25, 2025, joining supermarket Tesco and clothing and food group Marks & Spencer in achieving the landmark figure. Total group sales rose 8.2% to £6.3bn.
The company, whose shares are up 5% so far this year, said full-price sales in the first eight weeks of its 2025/26 year had been ahead of its expectations.
This prompted it to upgrade its guidance for full-price sales growth in the first half to 6.5%, from 3.5% previously, resulting in an increase in full-year guidance to 5.0%, versus 3.5% previously.
Next also raised its pretax profit guidance by 5.4% to 1.07bn.
The group did not upgrade its sales guidance for the second half of the year, noting that last year, the second half was much stronger than the first, making comparative numbers tougher.
Also, Next expects UK tax rises in April to weaken the jobs market and weigh on consumer confidence as the year progresses.
Next flagged in January a £67m increase in wage costs and National Insurance contributions in 2025/26, which it plans to offset via a combination of operational efficiencies, other savings and a 1% rise in prices on like-for-like goods.
Surveys published earlier this month showed British consumer spending lost momentum last month after a bounce at the start of the year, despite households' rising confidence in their personal finances and the broader economy.
Meanwhile, Swedish fast-fashion retailer H&M said on Thursday its sales were up just 1% in March after a weaker than expected first quarter, in a sign of a slow start to its spring and summer season.
H&M has ramped up marketing spend in a bid to boost its brand but the returns on that investment have been slow to appear, with anaemic sales growth and lower profitability.
The company reported sales of €5.12bn for the December to February quarter, up 2% in local currencies but below analysts' mean estimate. March sales growth was weaker than the 4% increase reported a year ago.
"Our sales and earnings in the quarter were somewhat weaker than planned – but the first quarter is the smallest quarter of the year for us in terms of sales and margin, and we are confident going forward," CEO Daniel Erver said in a statement.
Increased discounting and marketing investments impacted H&M's profitability in the quarter, the company said, with the operating profit margin falling to 2.2% from 3.9% in the same period a year ago.
Erver, who has led H&M for just over a year, is trying to turn its fortunes around through better marketing, spending on pop stars like Charli XCX to model its collections as he tries to make the brand more desirable and better compete against Zara and Shein.
In his statement, Erver said the hit to profitability from investments in the brand would be smaller in the second quarter, and improvements to H&M's womenswear product assortment were starting to have a positive effect.
After hosting a string of Charli XCX concerts last year, H&M has continued to invest in big-name brand ambassadors, hiring musicians Tyla and FKA Twigs to model its spring and summer collection launched last week.
The retailer, which also owns brands including Arket, Cos, & Other Stories, and Weekday, has been upgrading stores and sharply reducing its overall store numbers. H&M has 4,213 stores globally, it reported on Thursday, its lowest number since 2016.
Reuters.
