While other FTSE 100 stocks have grabbed more headlines in recent years, Next (LSE: NXT) shares have quietly but confidently accumulated in value. This positive momentum has continued with aplomb in 2025 following this morning’s (7 January) latest update from the retail bellwether.
Profit guidance raised
Trading over the all-important Christmas period was reassuringly strong. Full-price sales rose 6% for the nine weeks to 28 December. That was better than expected.
In response, Next has raised its FY25 profit forecast yet again to £1.01bn. Yes, this is only a slight improvement on the previous estimate of £1.005bn. But I reckon that’s no small achievement considering that the UK economy’s hardly in rude health. What’s more, it’s a good bit higher than the £918m made in FY24.
Looking ahead, Next said it expects full-price sales growth of 3.5% for FY26 (beginning in February). Pre-tax profit‘s anticipated to rise by a near-identical rate to £1.05bn.
It’s no surprise that the market has cheered this news. And considering the shares have already more than doubled in just over a couple of years, I’m now asking myself whether this might just be the best top-tier stock for investors to consider buying.
What could stall the shares?
The answer is probably no, as ‘the best’ is subjective and depends very much on individual investors’ strategies. And Next shares certainly aren’t devoid of risk.
Regardless of how well the company’s done over the years, retailing in general looks set to remain tricky for the foreseeable future. The British Retail Consortium revealed today that UK sales growth between October and December came in at just 0.4%. And this is before inflation’s taken into account.
Speaking of which, I reckon a lot depends on where inflation goes in 2025. Signs that the bounce has been short-lived may boost consumer confidence. But a higher-than-expected rise won’t go down well.
Let’s not forget that businesses are also being expected to pay higher National Insurance contributions for their workers from April.
Quite how much this will impact sentiment towards Next is open to debate. Its balance sheet looks robust and the £12bn-cap business has long posted far higher margins compared to peers. On paper, it bears many of the hallmarks of a quality business. But history has shown that its price can be volatile when the retail landscape gets bloody.
Still good value
All that said, we’re long-term-focused investors at the Fool. We’re more concerned where prices go over multiple years rather than just one.
For this reason, I think Next shares still warrant attention and are worth considering, even if there are other FTSE 100 stocks I like more. Under the assured stewardship of the longest-serving CEO in the index (Lord Simon Wolfson), I reckon the company will likely prove itself to be one of the most resilient in the sector once again.
The shares certainly don’t look expensive either, changing hands as they do at a price-to-earnings (P/E) ratio of 14. That’s only slightly higher than Next’s five-year average of 12.
While they can be wide of the mark, analysts have the stock yielding a 2.6% dividend yield for FY26 based on the current price. So at least holders will receive some compensation if the positive momentum seen over the last couple of years is temporarily lost.
