(Bloomberg) -- Next Plc said there will be a slowdown in sales and profit over the coming year as tax hikes take their toll.
Growth in its UK business is likely to ease as “employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy,” the British fashion and homewares retailer said Tuesday. Next expects its wage bill to climb by £67 million ($84 million).
The company is raising its prices slightly to cope with the additional costs, according to Chief Executive Officer Simon Wolfson. “We’re having to increase margins — which is pushing prices up — in order to pay for some of the wage increase,” he said in a phone interview.
Retailers are grappling with a higher minimum wage and payroll tax increases from the recent Labour budget. Chancellor of the Exchequer Rachel Reeves’ more than £40 billion in tax hikes is also weighing on consumer sentiment. Across the sector, mild weather in the run-up to Christmas drove shoppers to delay buying winter clothes.
Next expects full-price sales to rise by 3.5% in the year ending January 2026. That’s less than the 5.5% increase now expected for the current fiscal year.
The shares rose as much as 4.3% in London as investors predicted the company — which has a history of issuing conservative forecasts and delivering upgrades — will perform better than it anticipates.
Next’s pretax profit for the current year is now expected to rise 10% to £1.01 billion, up slightly from previous guidance. That follows three profit upgrades over the past year on the back of strong digital sales, in particular overseas. International online sales surged 31% in the nine weeks ending Dec. 28 from a year earlier, it said.
(Updates with CEO comment in third paragraph, shares in sixth.)
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