Next unveils special dividend for investors as it banks on bumper Christmas

Next has increased its annual profit forecast as the retailer banks on a bumper Christmas trading period after another quarter of strong sales growth. 

In a boost for shareholders, the retailer announced it would use surplus cash to pay a £3.10 per share special dividend to investors early next year. 

The group upped its forecasts for full-price sales in the final quarter from 4.5 per cent to 7 per cent. Sales exceeded expectations both in the UK and overseas.

Next notched up its full-year profit guidance for the fourth time in eight months as it reported a stronger-than-expected 10.5 per cent rise in full-price sales for its third quarter to 25 October.

Shares in the FTSE 100-listed business were up 5 per cent on Wednesday, extending gains this year to 48 per cent, after it said sales exceeded expectations both in the UK and overseas.

Russ Mould, investment director at AJ Bell, said: ‘It is hard to think of a company which has mastered the art of being on the stock market better than Next. 

‘The company consistently pitches its guidance conservatively allowing it to then surpass expectations when it comes time to report on trading.’

In the know: Lord Wolfson is the boss of retail giant Next 

As previously announced, the group’s interim dividend of 87p per share will be paid to shareholders on 5 January 2026.

The group said it now expected to report a pre-tax profit of around £1.14billion for the year to January 2026, up from previous guidance.

Third-quarter UK sales rose 5.4 per cent, with Next citing the stronger-than-expected positive effect of improved stock levels compared with last year when disruption in Bangladesh and constraints in global freight capacity delayed deliveries.

Overseas sales jumped 38.8 per cent, partly reflecting Next spending more on digital marketing than previously anticipated.

Next said in September it expected the UK economy to weaken and its sales growth to slow to 4.5 per cent in its second half. This would be down from the 10.5 per cent it reported for its second quarter, when it benefited from favourable weather and a cyberattack at rival Marks & Spencer. 

The retailer said it had placed more of its surplus stock into its mid-season sale in September rather than its Christmas sale. 

Shift: Next said it had placed more of its surplus stock into its mid-season sale in September rather than its Christmas sale

Analysts at RBC Europe, said: ‘Next should benefit from further real wage growth in the UK albeit it will remain somewhat sensitive to the employment outlook and cost of borrowing for the consumer.’

Dan Lane, UK lead analyst at Robinhood, said: ‘The real story today is the international segment, which is storming ahead. 

‘Marketing spend doubled compared to guidance but when it’s raking in revenues, it’s a sign of an efficient, returns-focused strategy. It’s this malleability and quality execution that comes with being a seasoned pro in the sector.’

Richard Hunter, head of markets at Interactive Investor, said: ‘Unsurprisingly, the share price has awoken to the singular strength of this slick and well-regarded company. 

‘Even prior to the strong price spike at the open, a rise of 33 per cent over the last year compared to a gain of 18 per cent for the wider FTSE 100, helping to lift the three-year performance to growth of 172 per cent, which is a considerable achievement given the traditional restraints which retail stocks face.’

He added: ‘The market consensus of the shares as a strong hold, which has been in place for some time, has been shown to have missed the boat on several occasions, where the naysayers who have doubted the stock’s trajectory may continue to do so at their peril.’

Next, headed by Lord Wolfson, has over 800 stores in the UK and Ireland, including Reiss, Joules and FatFace stores, plus an online presence in more than 70 countries selling the Next brand and more than 700 others.  

Next’s performance stands in stark contrast to many UK retailers battling dwindling sales. 

This week The Very Group reported a loss in its latest annual results, after writing-off a loan owed by the Barclay family’s holding company. 

The Very Group posted a pre-tax loss of £505.4million for the year to 28 June, falling from a £16.3million profit the year before. 

Group sales slipped 1.8 per cent year-on-year to £2.09billion over the period. But adjusted EBITDA jumped 15.9 per cent year-on-year to £307.1million. 

Next rival Marks & Spencer is on a mission to ramp up sales after a cyberattack earlier this year. M&S said the attack is expected to lower operating profits by up to £300million this year. 

DIY INVESTING PLATFORMS

AJ Bell

AJ Bell

Easy investing and ready-made portfolios

Hargreaves Lansdown

Hargreaves Lansdown

Free fund dealing and investment ideas

interactive investor

interactive investor

Flat-fee investing from £4.99 per month

InvestEngine

InvestEngine

Account and trading fee-free ETF investing

Trading 212

Trading 212

Free share dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you