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ANNUAL REPORT & ACC OUNT S J AN U AR Y 2026 Strategic Report 3 Chairman's Statement Financial Statements Group Financial Statements 4 Chief Executive's Review 181 Consolidated Income Statement 66 Business Model 182 Consolidated Statement of Comprehensive Income 68 Key Performance Indicators 183 Consolidated Balance Sheet 70 Risks and Uncertainties 184 Consolidated Statement of Changes in Equity 79 Viability Assessment 186 Consolidated Cash Flow Statement 81 Corporate Responsibility 187 Group Accounting Policies 101 Section 172 Statement 202 Notes to the Consolidated Financial Statements 106 Non-Financial and Sustainability Information Statement 110 Directors' Biographies 112 Directors' Responsibilities Statement 113 Corporate Governance Report 126 Nomination Committee Report 129 Audit Committee Report 138 Remuneration Report 170 Directors' Report 172 Independent Auditors' Report Governance Parent Company Financial Statements Parent Company Balance Sheet Parent Company Statement of Changes in Equity Notes to the Parent Company Financial Statements Shareholder Information 254 Half Year and Segment Analysis 255 Five Year History 256 Glossary 261 Notice of Meeting 268 Other Shareholder Information FINANCIAL HIGHLIGHTS Strategic Report NEXT TOTAL GROUP SALES £7.0bn Governance NEXT GROUP PBT Financial Statements £1,158m Shareholder Information NEXT GROUP POST-TAX EPS 744.2p FINANCIAL HIGHLIGHTS ON A STATUTORY BASIS Jan 26 . Jan 25 . Total Revenue (£bn) 6.9 6.1 Profit before tax (£m) 1,193 987.0 Basic Earnings Per Share (p) 760.1 615.1 Alternative Performance Measures as defined in the Glossary on pages 256 to 260. 1 STRATEGIC REPORT 3 Chairman's Statement 4 Chief Executive's Review 66 Business Model 68 Key Performance Indicators 70 Risks and Uncertainties 79 Viability Assessment 81 Corporate Responsibility 101 Section 172 Statement 106 Non-Financial and Sustainability Information Statement 2 CHAIRMAN'S STATEMENT Strategic Report The year ending January 2026 was a very good year for NEXT. Group profit before tax of £1,158m 1 was up +14.5% and Earnings Per Share 2 (EPS) grew by +17.0%. Cash flow remained strong and we returned £839m to shareholders through a combination of dividends (£286.5m), share buybacks (£131.4m) and the B Share Scheme capital distribution (£421.5m). A detailed analysis of our performance in 2025/26 and our outlook for the year ahead are covered in the following pages. In this statement, I would like to update on several changes made to our Board. Governance Jane Shields is retiring after 40 years of outstanding service, including 13 years on the Board. Her journey from Sales Assistant to Group Sales, Marketing and HR Director exemplifies NEXT's strong culture of investing in its people and promoting from within. I would like to express our deepest gratitude to Jane for her exceptional leadership and remarkable dedication throughout her career with NEXT. Financial Statements Jonathan Bewes reached the end of his nine-year tenure during the year and will step down at our 2026 AGM. On behalf of the Board, I would like to convey our thanks to Jonathan for his diligence and expertise in leading our Audit Committee, and his wise counsel as the Board's Senior Independent Director (SID). We have welcomed Annette Court and Jeni Mundy onto the Board as independent non-executive directors. Annette will take over Jonathan's role as SID. Shareholder Information I also reached my ninth anniversary on the Board in February 2026. The Nomination Committee has undertaken a thorough review of my independence and the Board has recommended an extension of my tenure of up to 18 months to facilitate a smooth transition for the aforementioned changes. You can read more about this on page 126. Our performance, as ever, remains a direct result of the hard work and dedication of the NEXT team. I would like to express my sincere thanks to colleagues across the Group for their effort, talent and dedication. Michael Roney Chairman 26 March 2026 1 NEXT Group profit before tax excludes: (1) the cost of brand amortisation, (2) the profit attributable to shares that we do not own in subsidiary companies, (3) an exceptional £16m gain from the sale of land in November 2025 and (4) profit from this year's 53rd week. Note, last year also excluded an exceptional, non-cash, loss relating to the closure of our defined benefit pension scheme. See page 59 for a bridge between NEXT Group profit and statutory profit, and Note 1 of the financial statements for details. 2 All references to EPS in the Chief Executive's Review are 'Basic' EPS, based on 'NEXT Group profit', unless otherwise stated. CHIEF EXECUTIVE'S REVIEW TABLE OF CONTENTS PART ONE - HEADLINES 5 PART TWO - THE BIG PICTURE 7 SALES INSIGHT - BY GEOGRAPHY AND BRAND 8 DEVELOPING GREAT PRODUCT 9 INTERNATIONAL GROWTH 14 CONTROLLING COSTS TO DELIVER GROWTH 17 NEXT'S APPROACH TO AI 18 ACCELERATING WAREHOUSE INVESTMENT 20 LONG TERM CAPITAL CONSUMPTION 22 THEN AND NOW 23 PART THREE - GROUP FINANCIAL PERFORMANCE AND GUIDANCE 24 GROUP SALES AND PROFIT SUMMARY 25 SALES AND PROFIT GUIDANCE FOR 2026/27 27 PART FOUR - RETAIL STORES, ONLINE, FINANCE, TOTAL PLATFORM & OTHER BUSINESS 30 NEXT RETAIL STORES 30 NEXT ONLINE UK 35 NEXT ONLINE INTERNATIONAL 39 NEXT ONLINE CUSTOMER ANALYSIS 41 NEXT FINANCE 42 INVESTMENTS AND TOTAL PLATFORM 45 OTHER BUSINESS ACTIVITIES 46 INTEREST, TAX AND ESG 50 PART FIVE - CASH FLOW, SHAREHOLDER RETURNS, NET DEBT & FINANCING 52 CASH FLOW 52 CAPITAL EXPENDITURE 54 DIVIDENDS AND SHAREHOLDER RETURNS 56 NET DEBT, BOND AND BANK FACILITIES 57 Strategic Report PART ONE HEADLINES Governance SUMMARY OF SALES AND PROFIT FOR 2025/26 Sales, Profit and Earnings Per Share Financial Statements (52 weeks vs 52 weeks) Jan 2026 Jan 2025 Var % Total Group sales £7,004m £6,321m +10.8% NEXT Group profit before tax £1,158m £1,011m +14.5% NEXT Group profit after tax £870m £761m +14.3% NEXT Group post-tax Earnings Per Share 744.2p 636.3p +17.0% Shareholder Information Statutory revenue and profit (53 weeks vs 52 weeks) Statutory revenue Statutory profit before tax £6,901m £6,118m +12.8% £1,193m £987m +20.8% Sales and Profit for the Year to January 2026 (52 weeks) NEXT full price sales 1 up +10.9% and total Group sales 2 (including subsidiaries) up +10.8% . NEXT Group profit before tax £1,158m , up +14.5%. This is +£8m higher than our previous guidance due to better than expected full price sales in January, along with improved clearance rates in our end-of-season Sale. Post-tax Earnings Per Share (EPS) up +17.0% . The Company returned £421m ( £3.60 per share) to shareholders by way of a B Share Scheme, representing 3.6% of the Group's market capitalisation 3 . 1 NEXT full price sales include all items sold in Retail Stores and Online plus NEXT Finance interest income, but excludes Sale events, Clearance, Total Platform commission and the sales from subsidiaries. 2 Total Group sales are the sum of total sales (full price and markdown) from all of the Group's divisions plus revenue from subsidiaries and investments. See page 25 for a bridge between Group sales and statutory revenue. 3 Based on the average share price during February 2025. GUIDANCE FOR THE YEAR TO JANUARY 2027 Guidance for full price sales growth in the year ahead maintained at +4.5%. NEXT Group pre-tax profit guidance increased to £1,210m , up +4.5% . This is £8m higher than the guidance given in January due to the increase in the base profit mentioned above. We anticipate returning £500m of cash to shareholders through share buybacks, special dividends or capital return. EARLY TRADE AND THE IMPACT OF CONFLICT IN THE MIDDLE EAST Sales in the first eight weeks of the year were encouraging in the UK; they were also strong overseas up to the point the conflict began in the Middle East. Looking forward, we have not yet reached the period of unusually strong UK trading we experienced last year and, perhaps more importantly, instability in the Middle East - which represents around 6% of our total turnover - may continue to restrain growth in that region. It is also likely to have knock-on effects on costs, selling prices and consumer demand in the rest of the business. We have accounted for £15m of additional costs that are likely to arise from the conflict, such as fuel and air freight, on the assumption that the disruption lasts for three months . These costs have been offset by savings elsewhere, so do not affect our guidance. Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing - but for today that remains a contingency not a plan. At this point, the longer term implications of the conflict are uncertain, and NEXT is not well placed to make predictions. As yet, we have no feel for the medium-term effects on supply chain resilience, freight rates, factory gate prices and consumer demand. Much will depend on how long the conflict persists, and how much permanent damage is done to the world's energy infrastructure. We will give a more detailed update with our first quarter Trading Statement on 6 May. We believe we will have a much clearer picture by then. In summary: In the short term there is a £15m cost to the Company, offset by savings elsewhere; in the longer term, and if the conflict persists, the costs are likely to be reflected in higher prices to consumers and disruption to our supply chain, both of which are likely to suppress sales. For detailed guidance, see page 27. Strategic Report PART TWO T BIG PI T R An exceptional year… follow that Governance Last year was exceptional. Sales were up +10.8%, profit up +14.5%, EPS up +17.0%. A good year in a retail business is gratifying, but also daunting. Ultimately, we are measured against our own performance last year; the better the year, the tougher the 'competition'. The questions that matter now are: how did we achieve that growth, and which avenues of growth can we develop in the year ahead? Advancing on two fronts - product and international NEXT advances on two fronts. First, we continue to improve and broaden our product offer - within the NEXT brand, other wholly-owned brands, and the third-party brands we sell. Second, we continue to drive growth in our international business , through better functionality and more effective marketing. Financial Statements That growth will need continued investment in our warehouses, development of our software and improved customer services. And all these activities must be accompanied by rigorous control of costs, net margins and return on capital. Cost control as an engine of growth Controlling costs is often underestimated. It sounds like the icing on the cake; it is not. Controlling costs delivers the margins required to invest in the marketing and infrastructure that drives growth - it serves the top line as much as the bottom line. Follow the money Shareholder Information Sales growth must achieve one overarching financial goal: the delivery of sustainable long term growth in earnings and dividends per share. Every activity we undertake - from new warehouses and marketing campaigns to the launch of new brands - must be assessed in terms of profitability and return on investment. We do not indulge in projects that some might think are 'strategic', but offer little hope of high returns or healthy margins. In short, the Company grows by following the money. Simple, but not easy Improve our product offer, grow overseas, develop our platforms, control costs, make margin, and follow the money. It sounds simple, and it is, but it's not easy. A good plan is only 10% of the battle, the rest is execution. And great execution cannot be willed from on high, it requires people capable of thinking and acting for themselves at every level, and that is what NEXT aims to be: an organisation that can move fast, take decisions, and get things done. We do not always achieve that ambition, but our aim is clear: at NEXT, whatever your role or level, you should be making decisions; if you are not, the chances are you are not doing it right. A guide to the rest of the Big Picture The rest of this section starts by giving a detailed insight into our sales growth (page 8). It then explains how we are improving our product ranges (page 9) and driving growth overseas (page 14). We explain why controlling fixed costs will be central to driving growth (page 17), and how AI can - amongst other things - help in that task (page 18). Recent growth means we must accelerate our warehouse investment programme (page 20) but acceleration in capex is consistent with the Group's long term rate of capital consumption (page 22). SALES INSIGHT - BY GEOGRAPHY AND BRAND The three tables below give much insight into NEXT's business. They show the relative size of our business segments, and where growth has been generated. The three tables show: Sales participation by segment - the percentage of full price sales generated from each area. Percentage growth rates of each segment. Cash growth delivered by each segment. In each table, the columns show the three categories of product we sell: NEXT, wholly-owned brands & licenses (WOBL), and third-party brands. The rows show sales (excluding finance income) by channel and territory. One insight demonstrates how the tables can be read together: International sales were up +35% and grew much faster than sales in the UK (+7%). But in cash terms they contributed more evenly to growth, with international up by £297m, versus the UK up £254m. FULL PRICE SALES PARTICIPATION % Full price sales participation NEXT brand WOBL 3rd Party TOTAL UK Retail Stores 30% < 1% 1% 32% UK Online 26% 4% 16% 46% Total UK 56% 5% 17% 78% International NEXT websites 10% 1% 3% 15% International 3rd Party Aggregators 6% 1% 0% 7% Total International 16% 3% 3% 22% GRAND TOTAL (UK & International) 73% 7% 20% 100% FULL PRICE GROWTH RATE % Full price sales: % growth vs last year NEXT brand WOBL 3rd Party TOTAL UK Retail Stores +3% +7% +21% +3% UK Online +6% +26% +9% +9% Total UK +4% +25% +10% +7% International NEXT websites +21% +63% +49% +29% International 3rd Party Aggregators +30% +364% - +46% Total International +24% +128% +49% +35% GRAND TOTAL (UK & International) +8% +49% +14% +12% FULL PRICE CASH GROWTH £M Full price sales: £m growth vs last year NEXT brand WOBL 3rd Party TOTAL UK Retail Stores +45 +1 +11 +57 UK Online +81 +47 +69 +197 Total UK +125 +49 +80 +254 International NEXT websites +97 +30 +49 +176 International 3rd Party Aggregators +74 +47 - +121 Total International +170 +78 +49 +297 GRAND TOTAL (UK & International) +296 +126 +129 +551 Strategic Report DEVELOPING GREAT PRODUCT THE NEXT BRAND Our aims remain clear: backing newness, improving quality and more choice. Backing newness Governance Gone are the days when this season's trials were next year's best sellers. Today, if you test, then wait-and-see, you will wait too long and miss out. In almost all categories, this year's best-selling items were new to our ranges. Delivering that newness means scouring the world for inspiration - seeking out the latest fabric developments, artwork, colours and shapes. We must then decide which trends matter and back them with conviction, and in depth. That requires great talent, hard work and, perhaps most of all, courage. Improving quality Financial Statements The table below compares price inflation in like-for-like 4 items to the change in the average selling price (ASP) of items sold. The difference reflects a gradual but meaningful shift in customer preferences - they are choosing to buy slightly fewer, higher priced, better quality items. NEXT Fashion only Jan 2025 Jan 2026 Jan 2027 (e) 5 Price inflation on like-for-like garments - 2.3% +0.9% +0.6% Average price of garments sold +0.6% +3.4% +2.2% Shift in ASP resulting from change in customer preference +2.9% +2.5% +1.6% Shareholder Information This trend to better quality plays to NEXT's strengths; it enables us to invest in better fabrics, yarns and prints. We have worked to improve the quality of products across the board, from entry-level prices through to the top end of our ranges. Perhaps surprisingly, some of the most successful investments in better quality have been upgrading entry-level products without increasing price. At the other end of the spectrum, we have successfully introduced new premium qualities, at higher selling prices than we offered before - potentially attracting new customers to the NEXT brand. Fabric first Over the last couple of years, we have learned an important lesson: we can significantly improve the quality of our ranges by working directly with mills, spinners and wash houses, long before designing any individual garments. Where we have done it well the results have been transformative, and we can do much more of this 'fabric-first' development going forward. More choice The NEXT brand serves a wide range of customers - different ages, different fashion attitudes, different budgets. All of them value the NEXT promise of outstanding design, excellent quality, and good value for money. Each of the initiatives above -newness, quality, fabric development - gives those different customers a little more of what they want. 4 Items which are virtually the same as last year. 5 The estimate is based on our buy. Great people It is talented and decisive people that make all this happen and we place great emphasis on developing and promoting from within - the majority of our Senior Product Managers started at Trainee level. Developing excellence is central to our success because in critical product roles - and across the Group - 'OK' is not good enough, a safe pair of hands will simply never deliver the innovation we need. Speed to market and productivity Over the last three years we have made significant improvements to our in-house Product and Data management systems. This has allowed us to introduce a new workflow system and use AI to assist with sales forecasting, sizing ratios and optimising markdown prices. The challenge now is to make sure that we get a return on the investment in these systems - getting products faster to market and increasing our productivity. For example, we believe we can be much faster in taking ideas from selection to the point at which the manufacturer has a firm contract for production; reducing the time taken to approve prices, fits and quality approvals, from seven to four weeks. Strategic Report WHOLLY-OWNED BRANDS AND LICENSED PRODUCTS Reaching customers beyond the NEXT brand Our wholly-owned brands and licences (WOBL) aim is to serve a different part of our existing customers' wardrobes and attract customers who might not normally shop with NEXT. WOBL brands are bought at NEXT's risk and make full margin; they fall into two categories: Governance Wholly-owned brands - Brands we have created (like Love & Roses, and The Set) or names we have acquired (like MADE, Cath Kidston, Russell & Bromley). Licences - Where we manufacture product categories under licence from independent brands. An exceptional year WOBL full price sales were up +25% in the UK, and +128% overseas. Growth was driven by improvements in our existing brands, the addition of new brands, and a drive to make many more WOBL brands available overseas. Financial Statements WOBL full price sales Jan 2026 Jan 2025 Growth % Total UK £247m £199m +25% International Direct International Aggregators Total International £78m £48m £61m £13m +63% +364% £138m £61m +128% WOBL TOTAL £386m £259m +49% Shareholder Information Net margin Overall WOBL net margins, after allocating all fixed overheads, were flat on the prior year at 18.3%. In the UK, leverage over fixed overheads enabled us to increase net margins by +0.8% to 16.3%. Overseas, we managed our net margins down from 27% to 22%. This planned reduction in net margin was designed to drive growth through more competitive prices. Challenges of managing WOBL brands In our last report we explained at some length how we manage these brands and how they compare to the NEXT brand, in terms of fashion and price. Three points are worth re-emphasising: Success is dependent on finding talented teams with a clear vision for a brand that genuinely offers something different . We are determined to avoid the ' Play-Doh' effect : where brands that start life brightly distinct, then gradually descend into a mush of similarity (in Play-Doh, without care, it all ends up as crusty brown). To preserve this distinctiveness, we manage each brand through independent teams with their own measure of success (sales and profitability). Individual brands do not have access to each other's commercial information. By the end of the current year, we will have launched three new wholly-owned brands, including the newly acquired Russell & Bromley. Established WOBL brands still growing, new ones are adding sales on top The ten brands we had established before 2023 have grown from £177m to £270m and continue to grow despite the addition of new brands and licences. The 29 brands launched since have added a further £116m of revenue, with recent cohorts still in their infancy and growing rapidly. WOBL Full Price Sales History: Established and Recent Brands Some failures along the way Of course, we have had some failures and false starts, closing one brand altogether and exiting some smaller licences. Failures are fine if they are dealt with quickly; the cost of a failure is around £3 million; a success is worth tens of millions, as can be seen above. The development of licences The aim of our licence business is to marry our product sourcing skills with the design inspiration of independent brands. This works well in areas such as childrenswear and swimwear, which require specialist production and quality standards. The table below shows the main product categories for licences with at least two years' trading history. Five year growth in full price sales Jan 2021 Jan 2026 £m Var 5 Year CAGR Childrenswear £7.4m £59m +£52m +52% Swimwear, nightwear & lingerie £0.2m £19m +£19m +148% Home textiles and hard goods £0.1m £10m +£10m +189% Home furniture £0.0m £9m +£9m New Total £7.7m £98m +£90m +66% The rationale for developing WOBL - small company brands, big company infrastructure Increasingly we think of the Product side of the NEXT business as a Content Creation business. A launchpad for new and developing brands, providing brilliant product people and innovative brands with an environment in which they can flourish. Within the NEXT environment, Brand and Licence teams can focus on the development of outstanding product, branding and photography. The Group provides a trading platform that would take many years and hundreds of millions of pounds to build -websites, warehouses, technology, data, and instant access to NEXT's 16m customer base. Strategic Report THIRD-PARTY BRANDS Third-party brands also had a good year. Overall full price sales grew by +14%, with +10% in the UK and +49% overseas. This growth added £129m to revenue, just under 25% of our total growth. Focus on the most important brands During the year we worked with our most important brands to improve their product selection and stock availability; and it was the improved performance of these key brands that drove growth, not the addition of new brands. Third-party brands overseas Governance Financial Statements Shareholder Information Third-party brands now represent 19% of the turnover on our direct (nextdirect.com) sites. Growth was accelerated by two factors: (1) making more third-party brands available overseas, and (2) offering a broader range of products from the brands we were already selling. INTERNATIONAL GROWTH The exceptionally strong growth in international sales this year has taken us by surprise. We believe this growth has been the result of five factors: Additional profitable marketing expenditure for our international websites. Improved website functionality and in-country services . Increased availability of WOBL and third-party products. The consolidation of our European operations into ZEOS 6 , which materially improved the availability of our product ranges on Zalando. The addition of two new overseas aggregator partners. Two exceptional factors that will annualise in the year ahead The graphs below show the sales growth for third-party aggregators and WOBL in the first and second half respectively. The transition to ZEOS took place in August, and availability of WOBL brands improved significantly in May. The result was a step change in performance for both areas in the second half. Both these one-off gains will annualise as the year progresses, and we anticipate a slowdown in international growth rates when they do. 6 ZEOS is the third-party warehousing and distribution business operated by Zalando. Through ZEOS, we consolidated the stockholding used to service Zalando's and NEXT's European websites. Strategic Report WEBSITE FUNCTIONALITY AND OTHER SERVICES We continue to improve the functionality of our international websites and the services they provide. The table below shows the progress made over the last 12 months. It shows the percentage of the clothing markets 7 in which we operate where we have relevant functionality/services. The final column shows the percentage of our business taken in the countries with the relevant function. For example, we have optimised the product listing page for 65% of the markets in which we operate which, between them, account for over 94% of our overseas business. Total Countries (Total 83) % of markets we serve TODAY % of markets we served 6 months ago % of markets we served 12 months ago % of NEXT Governance Int. sales Jan 26 82% 100% 99% 96% 94% 99% 85% 43% Local currency 83 Local language address & registration 67 Local returns solution 40 Optimised product listing page 75 Appropriate local sizing convention 80 Apple Pay Express 47 Parcel shop solution 16 Marketing expenditure >5% of sales 54 100% 100% 70% 75% 70% 50% 55% 55% 45% 65% 55% 20% 75% 70% 15% 60% 25% 15% 15% 5% 5% 40% 30% 25% >70% >30% Financial Statements KEY: Shareholder Information Improved functionality enables more marketing expenditure If our website works well, conversion rates 8 improve, and the return on investment in marketing increases, enabling us to increase the amount we spend. The final row of the table shows the number of countries where we profitably spend more than 5% of sales on marketing. Functionality gains becoming more marginal… but benefiting harder to reach markets We have prioritised improvements in our biggest markets. As time moves on, improvements push into territories with lower sales, so gains become more marginal. However, these improvements, when combined with marketing, have meant that we are now gaining traction in territories that had previously seemed impenetrable. The table below gives our growth by region, with strong gains in all regions. NEXT Direct: Full price sales £m Jan 2026 Jan 2025 Var % Europe 349 261 +34% Middle East 327 260 +26% Rest of World 100 79 +27% Total full price sales 776 600 +29% 7 International online market size estimates obtained from GlobalData and Statista for 2025 (total clothing, footwear and accessories). Numbers are rounded to the nearest 5%. 8 Conversion rate: the percentage of people arriving at the site who place an order. OVERSEAS MARKETING More than any other factor, higher spending on profitable marketing has driven growth overseas. We estimate that around 22% of our 29% growth in our direct business was driven by marketing. The table below shows expenditure rising over the last three years from £23m to £69m. The third row shows our key performance measure - the incremental cash profit (before marketing and fixed costs). We do not accept a cash return of less than £1.50 for every £1 spent; and, because we are not cash constrained, as long as we exceed that hurdle, we continue to increase expenditure. International marketing history Jan 2024 Jan 2025 Jan 2026 International digital marketing expenditure £23m £43m £69m % of NEXT Direct sales 4.4% 6.6% 8.0% Incremental cash profit per £1 spent on advertising (ROI) £2.08 £1.70 £1.75 Returns on investment maintained, despite rising expenditure Normally, such a steep increase in spend would result in a material decline in ROIs. Yet, despite increasing expenditure, ROIs have remained strong. Over and above the gains from improved website functionality, there are three main enablers of higher spending and strong ROIs: Better advertising through closer collaboration with key media partners, improved product relevancy by territory, slicker handover from ads to websites, and better measurement of genuinely incremental sales. Expansion into new territories , and deeper penetration in territories where we had previously had only moderate success. Increased marketing team resource and improved terms with key media suppliers. Are we setting marketing ROI hurdle rates too high? At £1.50 return, some might ask why our marketing hurdle rate is so high? There are two reasons to treat this number with caution: The difficulty in measuring incremental returns It is very difficult to measure the incremental returns from digital marketing. There is an irony here - the more accurately we target customers who want to buy a particular product from NEXT, the more likely they are to buy it anyway, making the advert unnecessary. So as we improve our advertising, we need to constantly re-evaluate its incrementality. A small mistake can result in a big drop in returns; a high hurdle rate mitigates that risk. The assumption that fixed costs remain fixed… The £1.50 profit calculation assumes that 'fixed' costs (Product, Finance, HR, etc.) remain fixed - which, in the short term, they do. BUT, if fixed costs rose in line with sales, and if we made no improvements in productivity, then the £1.50 return on marketing would fall to nearer £1.01. We are not panicking about this: the table below shows that we have actually increased net margins despite rising marketing costs. But the maths is clear - if we cannot get leverage over our fixed costs, the economics of marketing break down. NEXT Direct: Marketing and net margin history Jan 2024 Jan 2025 Jan 2026 Marketing as % of NEXT International Direct sales 4.4% 6.6% 8.0% NEXT International Direct net margin % 13.4% 14.4% 15.8% Strategic Report CONTROLLING COSTS TO DELIVER GROWTH The challenge for fixed costs The need to control fixed costs to fund growth in marketing presents a tension: we must continue to invest in the people and infrastructure needed for growth, but ensure that those costs grow more slowly than sales. And although the net margins for the Group have improved over the last twenty years, some of our 'fixed' costs have risen considerably faster than sales (see table below). So the assumption that we can get leverage over them going forward is far from guaranteed. Central overheads as a % of sales 2005/06 20 years ago 2015/16 10 years ago 2019/20 6 years ago 2025/26 Governance Last year Technology 9 1.1% 1.6% 2.3% 3.1% Product 1.0% 1.2% 1.4% 1.8% Finance, HR and Legal 0.5% 0.6% 0.7% 0.8% Financial Statements TOTAL 2.6% 3.4% 4.4% 5.7% There are good reasons for increasing investment… The increase in investment in all these overheads has driven growth. For example, the move online has allowed us to dramatically increase the breadth of NEXT's ranges - managing all that additional choice requires additional people. We have also built new product teams to manage third-party brands, and to develop new WOBL brands. Shareholder Information The growth of our Online business has required a step change in our investment in technology - from the platforms that serve our websites to the systems that manage our product data. And in many instances IT reduced other costs, for example our websites eliminated £65m of catalogue costs. And the more complex our business becomes, the more finance professionals we need to ensure that growth remains profitable. And net margins have moved forward… Other cost savings and productivity gains have paid for the increases in the table above and over the last twenty years Group net margins have increased from 14.5% in 2005/06 to 16.5% last year. Going forward we need fixed costs to remain fixed If we are to have the best chance of success going forward, we must do more to ensure our fixed costs reduce as a percentage of sales; only then will we be able to maximise the opportunity for marketing to drive growth. To be clear, in a growing business that does not necessarily mean cutting costs - it means ensuring that costs grow less than sales. It means wise investment, careful cost control and improved productivity. Our ambition is that all our 'fixed' costs reduce over time as a percentage of revenue. Answers are at hand This need to control our central costs comes at a time when opportunities to improve productivity abound. The work we have done over five years to modernise our major software applications and make our data more usable, positions us to harness the potential for AI to improve productivity in virtually every area of the business. 9 Technology cash costs (revenue costs less depreciation plus capex). NEXT'S APPROACH TO AI In most areas we are only scratching the surface of what AI can do for the business. This section sets out the approach we are taking to ensuring we harness as much of the power of AI as possible. NO 'AI DEPARTMENT' We are not developing a central AI function. The benefits AI can bring to software development, range development, customer service and warehouse operations are so varied, and their challenges so different, that generic advice from a central function would be little more use than a central Spreadsheet Department. The value of AI lies in the applications it supports, not the technology itself, and those best placed to understand the applications are the people who use them every day. Without their input and leadership, AI becomes a solution looking for a problem to solve. Our IT department ensures that the AI technologies we use across the Group are secure and cost effective. And, although we have no central AI department, NEXT's way of working is collaborative - cross fertilisation of ideas, sharing of best practices and key people is part of the way we work. In this field, as in other areas, those furthest in front help those still finding their feet. PROGRESS AND OPPORTUNITIES Progress It has been down to our divisional directors to advance the use of AI in their areas. The speed at which various divisions have found practical applications for AI has been very different. The progress of three divisions illustrates what we have been doing: TECHNOLOGY Unsurprisingly, our Technology teams have made good tactical use of AI. In most areas, teams are using co-pilot software assistants and deploying large language models to document new specifications. We are already seeing material improvements in productivity and quality as a result, delivering new software faster and for less cost. But there is much more to do. We are setting up the AI infrastructure with the aim of incorporating agentic AI in our end-to-end software development process. So, not just using AI to assist in the various tasks of specification, coding, testing, deployment and monitoring; but using AI agents to do some of the work and to pass work between these tasks. CONTACT CENTRES AI has been used in our Contact Centres for some time and has already made a huge difference to day-to-day working. It has been deployed to great effect in helping us answer queries more accurately and more efficiently; reducing costs and, more importantly, increasing our quality scores with customers. Encouragingly, there is much more to do. PRODUCT Product teams have used AI to improve sales forecasting, markdown price optimisation, size ratio management, product attribution 10 and returns forecasting. In terms of design, AI has been useful in visualising paper designs to improve selection decisions and assist manufacturers deliver more accurate initial samples. We are, however, wary of AI-initiated graphics, prints and styling; we feel in this area there is no substitute for an emotional connection to the human eye and hand. 10 Product attribution is the process which tags each item with descriptions that can be used by search engines and filters. Opportunities Strategic Report For good reasons, some areas are not as advanced as others. For example, our Warehouse team have been rightly focussed on commissioning their new mechanisation, so are not yet making use of AI to help run their day-to-day operations. AI, with its forecasting, scenario planning and optimisation abilities, should be perfectly placed to assist - we think this is a big opportunity for the year ahead. THE COST IMPLICATIONS The cost benefits in some areas are apparent… Governance The most exciting feature of AI is its ability to make us more effective, but productivity gains should also result in cost savings. It is already doing so in Technology and our Contact Centres. The graph below shows how costs in these areas have both declined as a percentage of sales 11 . Financial Statements Technology and Cost Centre Costs as a % of Sales Shareholder Information The implications for jobs We believe that it is unlikely that AI will displace those already working at the Company. There are two reasons for this: NEXT is growing, so any efficiencies are likely to result in us needing to recruit fewer additional people going forward, rather than fewer people overall. The jobs that may be at risk are the routine processing jobs, which tend to have high staff turnover, so can be managed down through natural attrition. Bottom line, at NEXT it appears to us that AI will change people's jobs rather than replace them, making them much more effective, and taking away many of the tasks they enjoy least. People will need to adapt and change, but NEXT people are generally good at that. If we are reflective of the wider economy, then those in jobs need not worry too much; the challenge will be for those looking to join the workforce. 11 Costs of technology are the cash costs, i.e. revenue cash costs (excluding depreciation) and capex added together. ACCELERATING WAREHOUSE INVESTMENT WHY WE NEED TO ACCELERATE WAREHOUSE INVESTMENT We have pulled forward the next three phases of our E3 Online boxed 12 warehouse development programme. We started placing orders for this project in Q4 last year, and it will continue over the next three years, with a total anticipated spend of £307m over that period. So, this year's capital expenditure is higher than the long-term forecast we gave in 2024. This is not because we will need to spend more overall, but because we will need to spend it sooner. The reason we are accelerating this capex is because: Online sales grew by +28% over the last two years, against our expectations of +10%. We have also increased our stockholding by a further 6% , to give some protection in the event of supply chain delays. 3% of our capacity has been lost as a result of the decommissioning of old capacity which was unreliable. 2% of our capacity has been lost as a result of lower box fill, resulting from a change in product mix. Combined, these factors mean that instead of being 69% full at peak, as originally planned, we were actually 87% full at peak. Actual and Planned Peak Capacity % What that means for this year With Online growth forecast to be +8% this year, we would be 94% full at peak. In reality, once utilisation rises above 90% the warehouse gets congested and performance declines, so we are alleviating that problem by using our other nearby warehouses to store reserve high-bay stock. This will give us another 7% headroom during those peak weeks. 12 This warehouse houses the items that arrive flat-packed, in standard size cardboard boxes. This type of product accounts for around 80% of our Online sales. Strategic Report What it means for 2027 and beyond In 2027/28 we will add a further 10% capacity, at a cost of £48m. This will give us the headroom we need to service demand next year. The complete E3 investment programme Governance The table below sets out the capacity we plan to deliver for each of the next three years and its associated cost. The third column shows the phasing of the capex for E3. For completeness, capital expenditure in other warehouses, and the total spend are shown in the last two columns. In total, the additional capacity is expected to accommodate £1.5bn of additional Online full price sales. Warehouse capacity and capex Capacity delivered Cost of E3 capacity Phasing of E3 spend Other warehouses Total warehouse capex 2025/26 (actual) - - £19m £33m £52m 2026/27 (e) - - £97m £43m £140m 2027/28 (e) +10% £48m £126m £29m £155m 2028/29 (e) +17% £134m £65m £65m £130m 2029/30 (e) +17% £125m Financial Statements +44% £307m £307m £170m £477m Shareholder Information PROFIT AND LOSS IMPLICATIONS OF ACCELERATED CAPEX We estimate that the P&L impact of the capital expenditure will be marginal, with increased depreciation and overheads being offset by the productivity gains delivered by the new equipment. The costs of depreciation and additional overheads are summarised in the table below, along with anticipated cost savings. In total, the net impact to profit in 2027/28 is expected to be a cost of £0.3m. Once all E3 capacity projects are live, their fully annualised cost of depreciation and overheads, combined with anticipated cost savings will result in an annual P&L charge of £7.3m. This increase in cost is small in the context of the £1.5bn sales that it will enable. So, over time, warehouse fixed costs should fall as a percentage of sales. P&L impact from new E3 warehouse capacity (£m) P&L impact 2027/28 (e) Cumulative P&L impact 2029/30 (e) E3 capital expenditure 48.0 307.0 Additional depreciation (4.2) (24.9) Additional overheads (1.2) (5.0) Efficiencies and cost savings 5.1 22.6 Net P&L impact (0.3) (7.3) ELMSALL 4 Looking ahead to the next decade, we are taking steps to ensure that we have capacity for growth. To that end, we have acquired 13 84 acres of land next to Elmsall 3, for which we have planning permission in place for a 1.2m square foot warehouse. We estimate that this warehouse, 'E4', would add at least 50% more capacity to the Elmsall complex. Once fully complete, E4 would accommodate around £2.5bn of additional sales 14 . We believe we will be in a position to commence building work by 2028, so that floor space for manual storage could be available from 2029 if needed. New automated E4 packing and picking could be available from 2030 at the earliest. LONG TERM CAPITAL CONSUMPTION Shareholders might look at the accelerating capex bill and ask whether NEXT has changed to become a more capital-intensive business? The graph below shows capital expenditure as a percentage of profit before tax (PBT) for the last twenty years. Inevitably capex is lumpy, but over time the average capex/PBT ratio has been 20%. This year we plan total capex of £237m, which is 19.6% of our expected PBT (see page 54 for detailed breakdown of capex). So in the long run our capital consumption is at historically normal levels. Capital Expenditure: 20 Year History 13 We have exchanged contracts for the land and completion is anticipated on 2 April. 14 Assuming that box-fill and average selling prices are in line with where they are today. Strategic Report THEN AND NOW Then and now Twenty-five years ago, NEXT was a UK retail business selling one brand. It was growing through store openings and recruiting new catalogue customers. Today, we still have a profitable UK store network and the NEXT brand remains the heart and soul of the business: But we have become an increasingly international, online platform selling an increasing number of non-NEXT brands, some of which we have acquired or developed ourselves. Growth is now driven through marketing, website technology, warehouse mechanisation, third-party aggregators and more - almost everything about how we do business has changed, what has not changed is why we do it. Governance Guiding principles At the heart of NEXT are two simple principles: Deliver products and services that we can honestly say create value for customers. Everything must pass the simple test: would you genuinely recommend this product or service to your friends? Financial Statements Deliver the net margins and returns on capital commensurate with the risks associated with a fast-moving industry. In simple terms: do your best for your customers and follow the money - the rest will take care of itself. An organisation that thinks for itself Shareholder Information Those principles are important because, with so many things going on in the business, it would be impossible for the Board to run the business through a 'grand plan'. The important thing is that everyone understands what success looks like. The Company can provide the foundations - great values, excellent training, the right resources, the latest technology and strong leadership at every level. But in the thick of thousands of trading decisions, it comes down to the initiative of the many, not the guidance of the few. In a world that changes faster than any central plan can adapt, each and every one of our departments needs to be as nimble and entrepreneurial as any one of our smaller competitors. If we can combine the fleet-of-foot of a small company with the systems, infrastructure and customer base of a large one, then together we can achieve so much more than any boardroom plan could ever design. PART THREE GROUP FINANCIAL PERFOR ANCE AND GUIDANCE NOTES ON THE PRESENTATION OF SALES AND PROFIT Note 1 - A 53rd week The financial year ending January 2026 includes a 53rd week, which adds £111m to the Group's turnover and £24m to pre-tax profit. All of the sales, profit and margin analysis presented in this section exclude the impact of the 53rd week, in order to give direct comparisons to the prior year. Week 53 is included in statutory revenue and profit, as shown on pages 25 and 26 respectively, and the cash flow analysis presented on page 52. Note 2 - Group sales By way of reminder, since the year ending January 2024, we have aligned the way we report sales in our subsidiaries with the way we report profits. For example, we own 74% of Joules so include 74% of their sales 15 in our top line. For completeness, full details of our rationale for this method of reporting are repeated in Appendix 2 on page 62. Note 3 - Brand amortisation costs We adopt the accounting convention used by many companies, where we exclude brand amortisation (a non-cash accounting cost) from our headline profit. For completeness, full details of our rationale for this method of reporting are repeated in Appendix 3 on page 63. Please note all other forms of amortisation are still included in our reported profit, e.g. amortisation of software. Note 4 - Rounding convention and casting Figures shown in tables throughout the Chief Executive's Review are rounded to either no decimal place or one decimal place. The accurate rounding of numbers means that sometimes tables will appear as though they do not cast down. This is not the case. Subtotals, totals and variances shown in tables are all based on the actual, unrounded figures. 15 This figure excludes their sales through next.co.uk (100% of which are included in our Online sales), Total Platform commission and revenue from cost-plus services (which are included within Total Platform sales). Strategic Report GROUP SALES AND PROFIT SUMMARY Total Group sales, which includes subsidiaries and equity investments, were up + 10.8% versus last year. Within this, NEXT full price sales in the year were up +10.9% . Governance TOTAL GROUP SALES BY DIVISION TOTAL GROUP SALES (VAT EX.) £m Jan 2026 Jan 2025 Var % Retail Stores 1,893 1,849 +2.4% Online (UK) 2,800 2,540 +10.2% UK Product total 4,693 4,389 +6.9% Online (International) 1,297 930 +39.5% Product total 5,990 5,319 +12.6% NEXT Finance 301 300 +0.2% Total Platform 78 67 +17.0% Other business activities 16 104 105 - 1.0% Total NEXT sales 6,474 5,791 +11.8% NEXT's share of sales from investments 530 529 +0.2% Total Group sales (52 weeks vs 52 weeks) 7,004 6,321 +10.8% Statutory revenue (53 weeks vs 52 weeks) 6,901 6,118 +12.8% Shareholder Information Financial Statements Walk forward from Group sales to statutory revenue The differences between Group sales and statutory revenue are summarised in the table below. By way of reminder, within Group sales we report the Gross Transaction Value (GTV) of third-party goods sold on a commission basis. Under statutory reporting only the commission earned is reported as revenue, instead of reporting the full GTV. £m Jan 2026 Jan 2025 Total Group sales (52 weeks vs 52 weeks) 7,004 6,321 Revenue from 53rd week +111 n/a less commission sales (full price and markdown, UK and International) - 749 - 648 plus commission earned on third-party brands' sales +301 +254 less sales from investments that are not consolidated in NEXT's accounts - 62 - 64 plus the minority interests' share of sales in subsidiaries that are consolidated in NEXT's accounts +178 +158 (Joules, Reiss and FatFace) plus other income (e.g. delivery charges) +118 +98 Group statutory revenue (53 weeks vs 52 weeks) 6,901 6,118 16 'Other business activities' includes Franchise, NEXT Sourcing and Property. PROFIT £m and EPS Jan 2026 Jan 2025 Var % Retail Stores 226 237 - 4.4% Online (UK) 524 457 +14.8% UK Product total 751 693 +8.2% Online (International) 198 131 +51.2% Product total 949 824 +15.1% NEXT Finance (after funding costs) 195 182 +7.5% Investments and Total Platform 17 88 75 +17.0% Other business activities 18 (45) (42) +8.7% Recharge of interest from Finance 50 50 - 1.5% Operating profit 1,236 1,090 +13.4% Lease interest (49) (48) +2.0% Operating profit after lease interest 1,187 1,042 +13.9% External interest (29) (31) - 4.8% NEXT Group profit before tax (52 weeks vs 52 weeks) 1,158 1,011 +14.5% PBT margin Taxation 16.5% (288) 16.0% (250) +15.3% Profit after tax 870 761 +14.3% Pre-tax Earnings Per Share 990.7p 845.2p +17.2% Post-tax Earnings Per Share 744.2p 636.3p +17.0% Statutory profit before tax (53 weeks vs 52 weeks) 1,193 987 +20.8% SUMMARY OF GROUP PROFIT BY DIVISION Detail Page 30 Page 35 Page 39 Page 42 Page 45 Page 48 Page 50 Page 50 Walk forward from our headline NEXT Group pre-tax profit to statutory pre-tax profit The differences between NEXT Group profit before tax (52 weeks) of £1,158m and statutory profit of £1,193m are summarised below, along with the equivalent numbers for last year. £m Jan 2026 Jan 2025 Headline NEXT Group profit before tax 1,158 1,011 Profit from 53rd week +24 n/a Exceptional profit from land sale (see page 61) +16 n/a Prior year, exceptional non-cash cost relating to the defined benefit pension scheme n/a - 15 Cost of brand amortisation (see page 63) - 18 - 19 Profit/losses from minority interests in Joules, Reiss and FatFace +12 +9 Group statutory profit before tax 1,193 987 17 Loan interest associated with investments are reported in the interest line of the P&L. Total profit for Investments and Total Platform including interest is £89.7m (Jan 2026) and £76.6m (Jan 2025). See page 45 for more detail. 18 'Other business activities' includes NEXT Sourcing, Franchise, Property, and Central costs. Strategic Report SALES AND PROFIT GUIDANCE FOR 2026/27 Guidance for the year ahead is summarised in the table below. We expect full price sales to increase by +4.5% . A further breakdown of this guidance is provided on the following page, by half and by geography. Guidance for total Group sales growth of +4.2% is lower than full price sales growth of +4.5%, mainly due to markdown sales not growing as quickly. Governance We anticipate that pre-tax profit will be £1,210m , up +4.5% , with EPS growth of +5.8% , assuming we complete £500m of share buybacks. Guidance for the full year 2026/27 (52 weeks vs 52 weeks) Full year (e) % Versus 2025/26 NEXT full price sales £5.9bn +4.5% Total Group sales (inc. markdown & investments) £7.3bn +4.2% NEXT Group profit before tax £1,210m +4.5% Post-tax EPS 787.3p +5.8% Financial Statements Note on share buybacks Shareholder Information In our previous guidance, issued in January, we had assumed no share buybacks , because the share price had consistently remained above our buyback price limit in recent months. Since February, we have been able to spend £196m on share buybacks at an average share price of £126.52. Based on our latest profit guidance, our price limit for share buybacks has increased from £128 to £131. See page 56 for further details on share buybacks. Full Price Sales Guidance by Division: UK and International The table below shows our guidance for full price sales in the first half, second half and full year by business division. Our previous guidance, given in our January Trading Statement, is shown in grey. Overall we have maintained our full year sales at +4.5%, but we have increased our guidance for growth in the UK and reduced our forecast for International sales for the following reasons: The reduction in International sales growth, from +16.5% down to +14.3%, reflects the disruption we have seen since the start of the conflict in the Middle East. Our new forecast assumes our sales in the Middle East will continue to be adversely impacted for the rest of the first half. The increase in our guidance for the year for the UK, from +1.6% to +2.2%, reflects the encouraging sales performance in the first eight weeks of the financial year. Full price sales growth versus last year First half (e) Second half (e) Full year (e) Previous guidance Retail Stores - 3.3% +0.2% - 1.5% Online UK +4.6% +4.7% +4.6% Total UK +1.3% +2.9% +2.2% Online International +14.7% +14.0% +14.3% Total Product sales +4.3% +5.3% +4.8% Finance interest income - 0.4% - 0.7% - 0.6% +1.6% +16.5% +4.8% - 0.6% Total full price sales +4.0% +5.0% +4.5% +4.5% In our January trading statement we set out our rationale for sales estimates in the year ahead, which, for completeness, are repeated verbatim below. January trading statement: We expect growth to be lower than the prior year for four reasons: In the UK , growth in the prior year was boosted by very favourable summer weather, competitor disruption and improved stock levels. So the UK will face tough comparatives , particularly in the first half. Continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses. Growth from our overseas direct websites is likely to moderate from the exceptional levels achieved in the prior year, which benefited from a +63% increase in profitable marketing expenditure . We think it is unlikely that we will be able to profitably increase our marketing expenditure by as much next year. Within this guidance, we have assumed that overseas marketing will increase by around +25%. In 2025, two one-off changes in overseas stock availability served to boost our international sales. These were: A significant increase in the amount of wholly-owned brands and licensed products made available on overseas websites. Combining our Direct and Aggregator stock holdings in Europe through ZEOS in August resulted in a step change in Aggregator sales. Strategic Report PROFIT WALK FORWARD FROM 2025/26 to 2026/27 (e) Shareholder Information Financial Statements Governance The table below walks forward our profit before tax from last year (ending January 2026) to our guidance for the year ending January 2027. £m Profit before tax 2025/26 1,158 Profit from full price sales, Total Platform and subsidiaries Additional profit from +7.7% increase in Online full price sales +76 Lost profit from -1.5% decline in Store full price sales - 11 Additional profit from Total Platform Equity and Services +5 Total profit from full price sales, Total Platform and subsidiaries +70 Cost increases Wage cost inflation and National Insurance increases (2 months) - 44 Costs arising from the Middle East conflict (3 months) - 15 Higher interest costs (mainly from lower cash on deposit) - 8 Marketing spend (ahead of sales growth) - 8 Total cost increases - 75 Cost savings Employee incentives (returning to normal levels) +39 Higher bought-in margin +10 Warehouse and Store efficiencies +8 Total cost savings +57 Profit before tax 2026/27 (e) 1,210 PBT versus 2025/26 (e) +4.5% PART FOUR RETAIL STORES, ONLINE, FINAN E, INVESTMENTS, TOTAL PLATFORM & OT ER BUSINESS NEXT RETAIL STORES HEADLINES Sales were ahead of last year but profits were down, mainly as a result of the increase in wage costs driven by higher National Minimum Wage and National Insurance. The combined effect of these changes was a 13% increase in the cost of part-time entry level wages, and a £25m hit to the Retail Stores' P&L. Full price sales up +3.5% versus last year, total sales (including markdown sales) up +2.4%. Like-for-like 19 full price sales up +2.3%, with +1.2% coming from new space. Retail Stores' profit 20 £193m, down -5.0%. Retail Stores' margin 10.2%, down -0.8%. SUMMARY OF RETAIL STORES' SALES AND PROFIT The table below summarises the sales and profit of our Stores. Please note that we include the cost of lease interest within Retail Store profitability. £m Jan 2026 Jan 2025 Var % Total sales 1,893 1,849 +2.4% Operating profit 226 237 - 4.4% Lease interest charge (33) (33) - 0.5% Retail Stores profit 193 204 - 5.0% Retail Stores margin % 10.2% 11.0% A very strong Spring Summer Season The graph below shows full price sales growth by quarter. We believe that the overperformance of the first half was the result of unusually warm weather and competitor disruption. Full Price Sales Growth by Quarter 19 Like-for-like sales growth excludes the impact of store closures, openings and refits. 20 Profits and margins in this section are given after deducting Retail lease interest costs of £33m. This is the proportion of the Group's total lease interest (£49m) attributable to Retail Stores. Strategic Report RETAIL STORES MARGIN ANALYSIS Net margin in the year was 10.2%, down -0.8% on last year. The margin impact of major cost categories is summarised below. Governance Retail Stores net margin on total sales to January 2025 11.0% Bought-in margin Bought-in gross margin on NEXT product was +0.1% higher than last year +0.0% due to product mix. This was offset by the new 'EPR' packaging tax (-0.1%). Markdown Higher clearance rates improved margin by +0.2% +0.2% Store Payroll Wage inflation and the increase in Employers' National Insurance reduced - 0.6% margin (-1.2%). This was partly offset by operational efficiencies (+0.6%). Store occupancy costs The increase in like-for-like sales, which reduced occupancy costs in those +0.0% stores as a percentage of sales (+0.3%), was offset by the cost of new space (-0.3%). Lower energy prices (+0.2%) were offset by lower business rates refunds (-0.2%). Warehousing & distribution Inflationary cost increases (-0.2%) and an increase in rent in one of our - 0.3% distribution centres (-0.1%) reduced margin. Central costs Investment in store technology infrastructure reduced margin. - 0.1% Shareholder Information Financial Statements Retail Stores net margin on total sales to January 2026 10.2% Guidance for Retail Stores in the Year Ahead In the year ahead we are budgeting for Stores' full price sales, on a like-for-like basis, to be down -3.0%. The addition of new space is expected to add +1.5% to Stores' sales, meaning that we expect Stores' full price sales to be down -1.5% versus last year. We expect Stores' profit in the year ahead to be £181m, with a net margin of 9.7%. The profit walk forward from 2025/26 to our guidance for 2026/27 is summarised below: £m 2025/26 profit Lost profit from reduction in like-for-like sales Wage inflation, National Insurance and Statutory Sick Pay Central overheads inc. staff incentives Store productivity and other savings Profit gained from new space (profit on sales less occupancy costs) 193 - 22 - 17 +14 +8 +5 2026/27 profit (e) 181 RETAIL STORE SPACE Space in the Year to January 2026 The table below summarises the change in store numbers and square footage over the year. In total, 16 new stores were opened, comprising eight stores in new locations, six relocations and the conversion of two Home stores to Fashion. In July 2025 we opened one of our largest stores to date, in Thurrock Lakeside shopping centre. Store numbers NEXT Sq. ft. (k) Concessions Sq. ft. (k) Total Sq. ft. (k) January 2025 457 7,591 488 8,078 New mainline stores (incl. 6 resites) & reconfigs +8 +116 +15 +130 Mainline closures - 4 - 59 +0 - 59 Change in mainline stores +4 +57 +15 +71 Clearance stores - 3 - 37 +0 - 37 January 2026 458 7,611 502 8,113 Change +1 +20 +15 +34 Change % +0.2% +0.3% +3.0% +0.4% Lease renewals in the year to January 2026 In the year to January 2026 we renewed 76 leases, with an average lease term of 4.7 years (weighted by value, to the earlier of the break clause or the lease end). These new leases reduced our annualised occupancy cash costs in these stores by £2.3m (-9%). Outstanding lease commitments At the end of January 2026, our average lease commitment (weighted by value) was 3.7 years, compared with 4.0 years at the same time last year. NEXT, Newcastle Eldon Square Strategic Report Performance of New Space The table below summarises the performance of the new, relocated, and converted stores in the year (excluding Thurrock). Our new store in Thurrock, as explained last year, was much more expensive as it carried the design and prototyping costs of our new shopfit concept. New store performance Sales vs target Net branch contribution Payback period IRR % 15 new stores - 12% 17% 29 months 32% Governance Reflecting on our Mistakes Overall, sales in new stores (excluding Thurrock) are forecast to be -12% below their appraised targets. A significant miss, particularly as 13 of the 15 missed their respective targets. With the benefit of hindsight, we think there are three reasons for our error: We have not opened much new space for many years, and in the intervening period like-for-like sales have fallen significantly... our collective memories are of better times for stores, and our sales forecasts were just too high. Financial Statements Where we have opened new sites out-of-town, we have not seen anything like the change in behaviour we saw during 1995-2010, with much less trade switching from in-town to out-of-town locations. If we are brutally honest with ourselves, we unconsciously made the mistake of stretching our sales estimates to where they needed to be to hit our appraisal hurdles. A profitable mistake Shareholder Information The performance of the new portfolio given in the table above presents us with a conundrum. Despite missing our targets and failing to achieve our investment hurdle of 24 month payback, the stores are still very profitable, with a net branch contribution of 17% (on VAT inclusive sales) and an IRR of 32%. Would we rather be without these profitable stores? No. And if that is the case, we need to change our investment criteria. Moving the goal posts when you fail to score is never a good look, so this needs careful explanation. Background: lower sales per square foot but higher shopfit costs Over the last ten years, like-for-like sales per square foot have fallen by around 30%, rents have, over time, adjusted by almost as much. But shopfitting costs have increased by 32%. So payback is bound to be more challenging. We have a choice - to stop investing in new stores, or to change our investment criteria. New criteria In future store appraisals we will use the forecast IRR as our primary investment hurdle. We will aim for an IRR of at least 27% . For a five year lease, that equates to a payback of around 30 months. The 'rule' will need to be flexible to account for risk so, for example, we could accept a lower IRR for a store with a turnover rent, where the profitability is more certain. In a world where capital costs are the biggest constraint to development, we need to ensure that we are making the best use of whatever assets are available in the stores we acquire. Gone are the days of replacing a perfectly good floor finish because it is not 'on-brand'. Thurrock Thurrock has a forecast payback of 6.5 years with an IRR of 12%. The IRR is boosted by the fact that the store is on a 15 year lease. In normal circumstances the length of the lease might be a cause for concern, however the store carries very low risk because its occupancy costs are linked to turnover (i.e. if the store takes less sales our occupancy costs reduce). Forecast Space in the Year to January 2027 In the year ahead, we plan to open eight new locations for NEXT and five standalone 'Bath & Body Works' stores. In addition, two stores are re-siting to new locations. The forecast change in store numbers and square footage is summarised below. Store NEXT Concessions Total numbers Sq. ft. (k) Sq. ft. (k) Sq. ft. (k) January 2026 458 7,611 502 8,113 New mainline stores (incl. 2 resites) & reconfigs +8 +130 +16 +146 Mainline closures - 2 - 13 +0 - 13 Change in mainline stores +6 +117 +16 +133 New Bath & Body Works stores +5 +0 +6 +6 Clearance stores +1 +1 +0 +1 January 2027 (e) 470 7,729 524 8,253 Change +12 +118 +22 +140 Change % +2.6% +1.5% +4.4% +1.7% Lease renewals in the year to January 2027 In the year ahead, we expect to renew 61 store leases, with a reduction of c.£1.1m (-6%) in the occupancy costs in those stores. Strategic Report NEXT ONLINE UK HEADLINES Full price sales up +8.7% versus last year. Total sales (including markdown sales) up +10.2%. Governance Online UK profit (including lease interest) was £511m, up +15.0%. Online UK margin improved to 18.2%, up +0.7%. SUMMARY OF ONLINE UK SALES, PROFIT AND MARGIN The table below summarises the sales and profit of our Online UK business (which includes NEXT branded products and our LABEL business, which sells all other non-NEXT brands). Financial Statements Online UK (£m) Jan 2026 Jan 2025 Var % Total sales 2,800 2,540 +10.2% Operating profit 524 457 +14.8% Lease interest charge (13) (13) +5.7% Online UK profit 511 444 +15.0% Shareholder Information Online UK margin 18.2% 17.5% FULL PRICE SALES ANALYSIS The table below summarises the full price sales performance of the different categories of brands sold through next.co.uk. We have split the sales in our 'LABEL' business into: (1) wholly-owned brands and licences, and (2) third-party brands. Sales grew across all categories, with the highest rate of growth in wholly-owned brands and licenses. Full price sales £m Jan 2026 Jan 2025 Var % NEXT brand 1,385 1,304 +6.2% Wholly-owned brands and licences 226 179 +26.5% Third-party brands 852 783 +8.8% LABEL total 1,078 962 +12.1% Total Online UK 2,463 2,266 +8.7% Wholly-owned brands, licences and third-party brands - definitions The table below explains the three categories of non-NEXT products we sell online. Wholly-owned brands Licences Third-party brands Explanation Brands that are 100% owned by NEXT Third-party brands provide NEXT with design and branding for specialist products - e.g. childrenswear. NEXT sources stock and takes markdown risk. NEXT sells the stock. Licensor earns a royalty on NEXT's sales. A third-party owns the brand and sources the stock. Stock is sold on our websites through commission or wholesale arrangements. Example Lipsy Love & Roses Friends Like These The Set Cath Kidston MADE Seraphine Russell & Bromley smALLSAINTS Baker by Ted Baker kidswear Laura Ashley Nina Campbell Rockett St George Superdry kidswear Nike Adidas Skechers Reiss 21 Ralph Lauren On Running Asics Net margin 16.3% 13.7% 21 NEXT owns a 74% stake in Reiss. It is not 'wholly-owned', and is run as an independent business so is categorised as a third-party brand. Strategic Report ONLINE UK MARGIN ANALYSIS Overall, net margin in the UK's Online business was 18.2%, up +0.7% on last year. Margins are best understood by reviewing the constituent parts of the business, which are summarised in the table below. Further margin analysis for each division is given below the table. Online UK division Total sales £m Profit £m Margin % Change in margin Governance vs Jan 2025 NEXT branded product 1,566 335 21.4% +0.3% Wholly-owned brands and licences 269 44 16.3% +0.8% Third-party brands 965 132 13.7% +1.4% LABEL total 1,234 176 14.3% +1.4% Total Online UK 2,800 511 18.2% +0.7% Financial Statements Note: As explained in our Half Year Results, we have restated last year's margin to account for the re-allocation of central overheads between LABEL and NEXT. There is no effect on overall Group profit or margins. NEXT branded product (UK) - Margin analysis NEXT branded product margin of 21.4% was up +0.3% versus last year; the main margin movements are summarised below. NEXT branded product reported net margin for year ending January 2025 20.0% Shareholder Information Central cost reallocation from NEXT UK to LABEL UK (see note below) +1.1% Restated net margin 21.1% Bought-in gross margin Bought-in gross margin on NEXT stock was down -0.1% due to the new 'EPR' packaging tax. - 0.1% Markdown Improved clearance rates improved margin. +0.1% Warehousing & distribution Margin was impacted by the following: Leverage of fixed overheads +0.5% Operational efficiencies +0.3% Inflationary cost increases (wages and national insurance) - 0.8% +0.0% The beneficial effect of higher selling prices was offset by slightly higher returns rates. Marketing Digital marketing investment increased by +6%, which was less than sales growth. +0.1% Technology Technology costs did not increase as much as sales. +0.2% Margin on NEXT branded product sales to January 2026 21.4% LABEL (UK) - Margin Analysis Overall net margin of 14.3% was up +1.4% versus last year. The margin impact of major cost categories is summarised below. LABEL reported net margin for year ending January 2025 14.1% Central cost reallocation from NEXT UK to LABEL UK (as explained above) - 1.2% Restated net margin 12.9% Bought-in gross margin Increased commission rates on low margin brands (+0.3%) and product mix +0.5% (+0.2%). Markdown Markdown costs grew in line with sales. +0.0% Warehouse & distribution Margin moved for the following four reasons: +0.8% Leverage of fixed overheads +0.5% Operational efficiencies +0.4% Lower returns rates and higher average selling prices +0.4% Inflationary cost increases (wages and national insurance) - 0.5% Marketing Marketing costs grew in line with sales. +0.0% Technology Technology costs did not increase as much as sales. +0.1% Margin on LABEL sales to January 2026 14.3% Guidance for Online UK in the Year Ahead In the year ahead we are forecasting for Online UK full price sales to increase by +4.6%. Based on this forecast, we expect net margin for the year to be 18.8%. Forecast net margins by division are summarised below, along with the prior year for reference. The improvement in forecast margin is mainly the result of anticipated operational efficiencies and cost savings, which more than offset inflationary cost increases. Online net margins by division Jan 2027 (e) Jan 2026 Change in margin vs Jan 2026 NEXT brand (UK) 22.1% 21.4% +0.7% LABEL (UK) 14.7% 14.3% +0.4% Online UK net margin 18.8% 18.2% +0.6% Attention : This is an excerpt of the original content. To continue reading it, access the original document here .