The high street staple has certainly had an interesting year market-wise. For much of 2017 Next has been in serious trouble – a Christmas statement-inspired plunge in January set the tone of trading, causing the stock to slide from £50 to £38 within a month. A rise back to £45 by May was then undone by the retail sector-nightmare that was June, with Next eventually slumping below £36 by early July. Since then, however, the company’s performance has been rather remarkable.
Its market turnaround began at the start of August, as its second quarter trading update sent the stock 10% higher in a single session despite posting a 2.2% fall in total sales. Investors ignored these figures, instead focusing on a) the 0.7% rise in full price sales, and b) a very minor adjustment to the company’s annual sales forecasts, with the lowest expectations rising from -3.5% to -3%.
The next step of its recovery came in mid-September, where the stock saw a muscular 13% rise following its half year results. Again, the figures themselves weren’t great: total sales dropped 2.3% – breaking down as a 8.3% dive in retail sales and a 5.7% increase in the directory business – while pre-tax profit fell 9.5% to £309.4 million, the steepest decline since the recession. However, the usually bearish Lord Wolfson said he was ‘more confident’ in the company’s outlook, further revising the full year sales forecasts to a range of minus 2% to plus 1.5%.
All this eventually lead it to a 13 month high of £53.55 by the start of October, and while it has slipped to a current trading price of £49.02, that’s still a 35.5% improvement on its mid-July nadir.
Now Next needs to justify this rise; investors will be expecting the third quarter sales figures to reflect the twice-improved full year outlook, ideally with the company eking out a positive reading. That may be difficult, however, given the recent – really, really dreadful – retail sales readings coming out of the UK.
Next PLC (LON:NXT) has a consensus rating of ‘Hold’ with an average target price of £44.09.
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