The Next chief executive, Simon Wolfson, took home more than £7m last year, his highest ever pay package, and could be handed up to £9.27m this year after the retailer announced plans to increase his basic salary and bonuses.

The listed company said it was increasing its pay deal for the long-term leader of the fashion and homewares retailer, which now controls a string of brands in the UK including Gap, Victoria’s Secret, Cath Kidston, Reiss and FatFace, as his remuneration was 30% below the average for FTSE 100 bosses.

The directors on its remuneration committee said in the annual report published on Thursday that the changes were also being made as Next’s returns to shareholders had been higher than other leading listed companies over several years.

“Given this sustained outperformance, the committee does not consider the current levels of remuneration to be appropriately aligned with performance,” the report said. It also said pay needed to rise because of “the need to retain and motivate its high-quality management team, to support orderly succession planning, and where necessary, external recruitment”.

Last year, Wolfson’s pay rose to £7.4m from £4.9m a year before after he earned £967,000 in basic pay during the financial year, a maximum £1.45m annual bonus and long-term bonus of £4.7m as well as pension contributions and benefits such as a company car with driver.

This year, Wolfson’s basic annual salary is increasing by 3% to £1m but his maximum annual bonus is rising to 200% of salary, up from 150%, and his long-term bonus to 400% of salary, up from 225%. Performance for the long-term bonus will be judged on growth in earnings for each share and dividends.

The company said it was ditching its previous measure of total returns to shareholders compared with 20 other listed retailers partly because “many retailers have failed over the past two decades, such that it has become increasingly difficult to compose a basket of appropriately comparable businesses”.

The long-term bonus potential of other Next non-executive directors will rise to 300% of salary and the company said it wanted to “reserve the right” to increase their annual bonuses to 200% of salary from 150% at present. Four out of five Next executive directors earn more than £3m already, including bonuses.

Despite warnings of potential inflation and dampening consumer confidence as a result of the Iran war, last month, Next upped its profit guidance by £8m, to £1.2bn, for the year to January 2027 after better-than-expected sales in January this year. It made £1bn of profits for the first time last year.

The retailer was created in 1982, when the 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.