ii view: Next goes from strength to strength
Enviable overseas sales growth and with the opportunity to return surplus cash as a special dividend. Buy, sell, or hold?
24th November 2025 11:25
by Keith Bowman from interactive investor
Third-quarter trading update to 25 October
- Full price sales up 10.5% from Q3 a year ago
- UK full price sales up 5.4%
- Overseas sales up 38.8%
Guidance
- Now expects fourth-quarter full price sales to rise by 7%, up from a previous 4.5%
- Now expects full year pre-tax profit of £1.135 billion, up from a previous £1.1 billion
- Considering a potential special dividend payment of around £3.10 per share
ii round-up:
Next (LSE:NXT) is a retailer of clothing and homeware products, selling both its own and other third-party branded goods.
The Next Online business including both UK and overseas accounted for 55% of overall revenues over the group’s last financial year to 31 January 2025.
The Next Retail or store business generated 29% of sales. The balance came from Consumer Credit or Finance business at around 5% and the relatively new ‘Total Platform and Investment business, where it invests in and outsources the use of its online operations to others, at around 11%.
For a round-up of this latest trading update announced on 29 October, please click here.
ii view:
Tracing its roots back to 1864, the retailer was founded as J Hepworth & Son, a gentlemen’s tailors in Leeds. Today it competes against rivals Marks & Spencer Group (LSE:MKS), ASOS (LSE:ASC), Associated British Foods (LSE:ABF) owned Primark, and even clothes sold by Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY). A constituent of the FTSE 100 index and headquartered in Leicester, Next employs over 30,000 people. Investments made in and users of its Total Platform business include Reiss, Fat Face, Joules and Cath Kidston.
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For investors, expected tax rises at the UK Budget may hinder sales. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. The importance of the weather in potentially impacting demand cannot be forgotten, while eventual succession of CEO Lord Wolfson deserves thought given his importance to the company.
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To the upside, the retailer’s broad strategic pushes include a move to becoming a global brand and retailer, developing new brands, as well as growing the Investment and Total Platform business. A high focus on costs remains. Group investment in stores, technology and warehouses is ongoing, while shareholder returns are provided via a mix of share buybacks and dividends with the shares currently on a forecast dividend yield of around 4%.
In all, and while risks remain, this extremely well managed retailer continues to justify its place in many diversified investor portfolios.
Positives:
- Product and channel diversity
- Majority of sales and profits generated online
Negatives:
- Uncertain economic outlook
- Chief executive considered key in prospects
The average rating of stock market analysts:
Strong hold
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