Next has warned that it will have to increase prices on products to offset the effects of the Government’s Autumn Budget.

The retailer said that increases to the national living wage and employer national insurance contributions in the Chancellor’s first Budget in October were set to add £67m to its wage costs when they come into effect in April, increasing to £73m in the next full year.

As a result, Next said it is looking to offset these costs through operational efficiencies and other cost savings and a 1% increase on prices on like-for-like (LFL) goods. On the latter, it said this was"unwelcome", but is still lower than UK general inflation.

Despite these changes, the firm looked positively at the Christmas period, where LFL sales came in higher than expected.

As a result, Next has increased its guidance again in line with full price sales increasing by 3.5% in January. Full prices sales are set to increase to £5.05bn, compared to a previously estimated £5.02bn in the 2024/25 financial year.

Furthermore, its profit before tax is set to reach £1.01bn, up from an estimate of £1.005bn.

Investment director at AJ Bell, Russ Mould, stated: "The latest trading update from Next brings yet another upgrade to earnings forecasts, the ninth in the past two years, and as a result management expects the company to generate record profits in the year to January 2025.

"A further increase in earnings is expected for the financial year to January 2026 as well, but the modest forecast rate of increase, the diminishing scale of the forecast upgrades and the absence of an upside surprise for the coming year may help to explain why shares in the retailer still stand below September’s all-time high.

"These figures are a further reminder, as if one were needed, that retailers can thrive, regardless of what the weather does, if they sell the right product at the right price point in the right format for the target customer base. Doing this correctly will improve stock turn and sell through, reduce the need to discount and in turn help profit margins and cash flow."

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