It may not be a fashion leader or the cheapest place to fill your wardrobe, but Next has quietly confirmed its place as a British success story by ringing up £1bn in profits for the first time.

Next’s growth came despite static sales of its own label in the UK as it expands the brand overseas – including via online marketplaces such as Zalando – and sells other labels it has invested in both online and in its stores.

The clothing and homewares retailer was created in 1982, when men’s suiting retailer Hepworths, founded in 1864 by the Leeds tailor Joseph Hepworth, bought the women’s clothing chain Kendall & Sons and set about reinventing it.

It has since grown into an online behemoth selling fashion around the world and buying up stakes in a string of brands from Cath Kidston, to Reiss, to Fatface.

After a string of savvy deals in recent years, Next now controls the UK distribution of US brands Gap and Victoria’s Secret, creates Laura Ashley homewares, Ted Baker childrenswear and lingerie, and sells dozens of other brands it does not own via its website.

On Thursday the retail group, which is headed by Conservative peer Simon Wolfson, said pre-tax profits had risen 10% to just over £1bn in the year to January after sales increased 8.2% to £6.3bn, led by strong overseas growth and sales of other brands.

It is only the fourth UK retailer to pass the £1bn profit threshold. Tesco has profits of more than £2bn, while B&Q owner Kingfisher hit it in 2022 and Marks & Spencer did in 2008 but both have since fallen back. JD Sports had been on track to pass the barrier last year but missed that mark and has admitted it will miss it again this year.

“Next continues to defy gravity with its performance,” said David Hughes, a retail analyst at Shore Capital.

Next has continued to expand as many rival retailers are struggling amid higher costs, a squeeze on household spending and a shift to online shopping. However, the company has benefited from advantages in its history and because of a string of smart investments.

Even before anyone shopped online, Next was well positioned to take advantage of the shift, having set up its mail-order arm, Next Directory, in 1988 – a move which transformed the then rather drab worlds of catalogue shopping.

When online shopping arrived in the early 00s, Next was able to use its established delivery network to take part more quickly than rivals such as Marks & Spencer and then realised it could win over shoppers by getting parcels to their homes more quickly than others.

More recently, the company was also one of the first British high street fashion retailers to begin selling other brands’ goods on its site – starting with a small selection of sportswear and lingerie labels before becoming more ambitious. This is a tactic now being adopted by Marks & Spencer and even online specialist Boohoo, which is rebranding itself as Debenhams.

Next shares rose more than 9% on Thursday and Wolfson said he now expected to make almost £1.07bn next year, £20m more than previously forecast, because the first eight weeks of the new financial year had been “ahead of our expectations”.

Next now predicts that sales in the first half of the year will rise by 6.5%, up from previous expectations of 3.5%, as it reiterated plans to increase prices for shoppers by 1% to help pay for the increase in employer national insurance contributions and rise in the minimum wage announced in last October’s budget.

The group, which has more than 400 shops, also intends to increase its total high street space for the first time in more than five years, with plans to open 10 new stores and close nine. Last year the chain reduced by one store, and in the year before by a net eight.

Wolfson, said: “We are as positive about the company today as we were [a year ago], albeit in an environment where the risks to the wider UK economy are growing. We expect the UK tax rises in April to weaken the UK employment market and negatively impact consumer confidence as the year progresses.”

He added that the government’s planned improvements on employment rights were broadly welcome but said getting the final details wrong – such as the rules governing “low hours” contracts – could create a huge risk for employment levels and potentially “cause havoc”.

Wolfson warned that the £1bn profit did not mean that the retailer’s shareholders “can afford to pay for Next’s unnecessary expenses” and that big business was not “a few very rich people with ‘broad shoulders’; shoulders that can afford to take on the burden of paying for excessive regulation and government financing”.

He added that it was possible that Next’s profits could fall back from £1bn and while “it is nice to have the milestone, and encouraging, in itself it doesn’t change the business”.

Wolfson said in a lengthy statement: “Policymakers should not allow themselves to believe that burdening ‘big’ business does not impact the lives of millions of ‘ordinary’ people: it does – consumers through higher prices, workers through fewer jobs, and savers through lower pension income.”

The company is facing pressure from some investors to increase pay for staff. Wolfson said he was “interested to discuss their ideas” but leadership on higher pay was “not something any one company can take on. That role is something for government.”

Next said it expected new technology in its warehouses, a reduction in staffing hours in its stores, and a cut in energy bills to help offset the rising cost of labour from the autumn budget changes.