The high street retailer Next expects its annual profits to top £1.1bn after it rang up much stronger sales than expected over Christmas – but it has warned that 2026 will be tougher amid “continuing pressures on UK employment”.

The clothing and homewares retailer said it was improving annual profit forecasts by £15m, its fourth upgrade in six months, after UK sales rose by 5.9% in the nine weeks to 27 December, far stronger than the 4.1% expected.

The FTSE 100 company said sales were aided by higher stock levels than the prior year when deliveries were delayed by disruption in Bangladesh.

The company, which owns the UK rights to the US brands Gap and Victoria’s Secret as well as stakes in a plethora of labels including Reiss and Joules, said it had also had a better than expected end of year sale, with £30m more than predicted going through the tills.

Sales for the year to the end of January are expected to rise 10.7% to £5.6bn and pre-tax profits to be up 13.7% to £1.15bn. It had previously said profits were likely to increase by 12.2% to £1.14bn and sales to rise 9.7%.

Overseas, Next said its sales had also been stronger than anticipated – up 38% compared with the 24% growth it had forecast – as it increased marketing spend and sold more through a partnership with the online specialist Zalando.

The strong performance will lift hopes for UK fashion retailers, which were thought to have struggled amid a warm autumn and early winter, and as households battled high energy and food bills.

The latest Worldpanel by Numerator UK clothing survey, previously known as Kantar, indicated that UK fashion sales fell 1.4% in the four weeks to 7 December.

Fears for the sector have also been raised after two retailers owned by the investment group Modella Capital – the jewellery and ear-piercing chain Claire’s and the cut-price homewares chain The Original Factory Shop – said on Monday they were poised to call in administrators.

Next warned that growth in the next financial year would be slower – 4.5% – as it expected “continuing pressures on UK employment are likely to filter through into the consumer economy as the year progresses”.

It added that 2025 had been aided by one-off factors including a very sunny summer and the online shutdown of its rival Marks & Spencer for several weeks after a cyber-attack at Easter.

It said “growth from our overseas direct websites is likely to moderate from the exceptional levels achieved this year” as it would not lift marketing spending as much. Next also made changes in its operations that made more product available to online sellers in 2025 and those are largely completed.