By Connor Campbell, Financial Analyst, Spreadex
Stock of the day: Next PLC(LON:NXT) (LON:NXT)
It’s been a miserable couple of years for Next, 2016’s Brexit-blighted trading leading immediately into a precipitous plunge at the start of 2017. There the stock fell 16.8% in the space of 2 days after issuing an early-in-the-year profit warning. That drop has defined Next’s year-to-date, leaving it to spend the intervening months trying (and largely failing) to recover its lost value.
After bouncing between £38 and £39 across February and most of March, Next found a bit of joy with its full year results, climbing 7.5% in a single session despite the company posting its first fall in annual profit for 8 years. It appears that an admittance of mistakes made, and a promise to return to its ‘heartland product’, compensated for a 5.5% slide in pre-tax profit and a 2.9% drop in total retail sales.
This renewed sense of good will continued across spring, and even helped Next push past a disappointing first quarter report at the start of May. There the company posted a 2.5% fall in total sales for the 13 weeks to the end of April, comprised of an 8.1% plunge in store sales and a 3.3% increase in directory (i.e. online and catalogue) sales. Yet although the stock did suffer a brief dip, by the 22nd May it had crossed £45 for the first time since its January profit warning.
Sadly for Next, summer has seen the stock’s recovery gradually eroded by wider concerns about the state of the UK retail sector, fuelled by the toxic combination of rapidly rising inflation and stagnant wage growth. This eventually forced Next below £36 by mid-July, a level not seen since the day of the Brexit result last June, before a mild rebound lifted it back to a current trading price of £38.37.
As for the company’s second quarter figures, analysts are expecting Next to post an 8.8% decline in retail sales but with a 5.2% increase in online sales. Currently its full year profit forecasts stand at £740 million – if the company takes a bit off the top, as it did in May, then the state of its sales may not matter.
Next PLC has a consensus rating of ‘Hold’ with an average target price of £44.78.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved. In relation to fixed odds, Spreadex Ltd is licensed and regulated by the Gambling Commission under licence number.