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FTSE 100 company Next (LSE:NXT) is undoubtedly the UK retail sector’s star performer right now. Up 0.8% on Wednesday (8 May), at £12.39, Next’s shares are rising again as it announced another upgrade to its sales and profits forecasts.
In the latest of several such upgrades over the last year, it predicted that full-price sales are will rise 6% in the financial year ending January 2026. At an anticipated £5.4bn, this represents greater growth than the 5% predicted beforehand.
Total group sales are now tipped to rise 5% year on year, better than a previously forecast 4.4% increase, to £6.6bn. Consequently, full-year pre-tax profit of £1.1bn is estimated, up 6.8% from fiscal 2025. Profit growth was tipped at 5.4% previously.
Broker upgrades coming
Next’s upgrade comes after it announced better-than-expected sales in the first quarter. Full-price revenues were up 11.4% in the 13 weeks to 26 April, the firm said, resulting from “warmer weather [which] benefited the sale of summer-weight clothing.”
Sales beat forecasts in both the UK and overseas, and sailed past the 6.5% rise that had previously been anticipated.
Given its impressive momentum, the City’s bright growth forecasts for Next shares (as shown below) are likely to receive another healthy lift.
| Financial Year To January… | Predicted earnings per share | Earnings growth | Price-to-earnings (P/E) ratio |
|---|---|---|---|
| 2026 | 688.17p | +12% | 17.9 times |
| 2027 | 737.48p | +7% | 16.7 times |
| 2028 | 799.44p | +8% | 15.4 times |
Can it keep impressing?
Can the clothing colossus continue its hot streak of forecast beats? While I wouldn’t bet against it, I do have some reservations.
Despite its estimate-bashing first-quarter performance, Next has kept projections for the current quarter unchanged. It predicted that “some of the overachievement in Q1 will have pulled forward sales of summer-weight products from Q2.”
Looking further out, Next noted too that “we are more cautious” about second-half sales due to strong comparatives in the prior year. It added that “the full effects of this April’s National Insurance increases will begin to filter through to the wider economy” later in financial 2026.
The prospect of further interest rate cuts will give shopper spending power a boost. But the impact may be limited as the UK economy struggles for growth. Data from Which? showing consumer confidence slumped to its lowest since December 2022 this month underlines the challenges still facing UK retail.
Should I buy Next shares?
While Next’s recent performances are undoubtedly impressive, I feel that the good news is now fully baked into its share price. At almost 18 times, its forward price-to-earnings (P/E) ratio sits above the peak of its five-year average.
I also continue to have reservations about the long-term outlook, with Britain facing prolonged economic weakness and retail competition intensifying. While it’s trading terrifically well for the moment, I’d rather find other UK shares to buy.
