The retailer Next has issued a warning over slowing sales growth this year and because of the Chancellor’s Autumn Budget they have said there will be price hikes.
The retailer said they are facing a £67 million surge in their wage costs in the year to January 2026 which will soar to £73 million.
From April employer national insurance contributions and the minimum wage will rise, Rachel Reeves announced in the Budget.
Next said: “We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.”
Chief executive and Conservative peer Lord Simon Wolfson told PA news agency, “We’re not looking at a dramatic increase in unemployment but… it’s these jobs that are most likely to be lost in the economy.”
“The cost increases are serious, but with a combination of price increases, efficiencies and cost savings, we can still grow profits in line with sales,” he added.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, said, “Next has enjoyed a strong Christmas with its online business seeing an acceleration in sales growth in the fourth quarter, both in the UK and overseas. The year ahead is forecast to be more challenging, but Next still expects to grow sales and profit. It is a classic example of a strong business getting stronger.
Next has pulled another rabbit out of the hat this Christmas, beating its sales forecasts once again. More important for investors is the guidance for the coming year.
Calendar year 2025 is likely to be a bloodbath for the UK retail sector. The Autumn Budget means retailers will face a significant increase in employee costs and many will not be able to offset this. Next stands apart for its ability to do so, with its high margins, strong overseas growth and efficiency initiatives all helping it to preserve profitability.
Next has also warned it will need to put up prices in the year ahead. Many other retailers are likely to follow suit. This is likely to add to inflationary pressures and could encourage consumers to tighten their belts in 2025.
Overall, the UK retail sector sits between a rock and a hard place. Costs are going up, margins are likely to come down and consumers face an inflationary squeeze. Next though is well placed to weather the storm. If any retailer can thrive in this environment, it’s probably them.”
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