Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Next Reports Sales After 2019 Share Surge

Published 03/01/2020, 06:14
Updated 14/12/2017, 10:25

Year-ahead view more in focus than Christmas sales

With shares approaching an 80% gain in 2019, Next PLC (LON:NXT). was one of the least-predicted retail turnarounds of last year. After hesitant early steps, the 155-year old clothier’s multi-channel, multi-brand online strategy and painstaking rebalancing of bricks and mortar operations have been vindicated. The stock’s recent advance has been all the more surprising not just because of an—at the time—seemingly never-ending string of sales and profit misses linked to everything from unpredictable weather to fickle shoppers. The turnaround also raised eyebrows because Next’s semi-discretionary consumer sector is one of the most sensitive to potential impacts from Brexit uncertainty, as well as the inexorable march of retail flows away from the High Street and on to the Web.

As such, the £9.3bn group will be sharply in focus when it kicks off the seasonal sales reporting season for British retailers on Friday. A key point to remember: So long as Next maintains a pattern of high single- to double-digit online sales growth, the market is likely to continue to shrug off persistently tepid store sales. Below are some other key points to know and watch.

  • Timing: Next will release a Q4 2019 Trading Statement at 07.00 GMT on Friday 3rd January
  • 2019/20 performance: given that it will be end of Next’s financial year, investors are keen to see whether the group with reiterate guidance for pre-tax profit growth of 0.3% to £725m by the time it reports full-year profits in March. Full-price sales are expected to have grown 3.6% in 2019/20, with EPS up some 5%
  • Outlook: 2020/21-year sales forecasts will be even more important. Retail sector anxiety showed no let-up in the final part of 2019 as high-profile operators on both sides of the Atlantic continued to struggle. Investors are looking for a forecast of no less than around 3% in terms of Next’s same-store sales growth in the year ahead. That has been the group’s average total run rate for the last several months, including robust digital sales
  • Likely stock price reaction: Weaker guidance may undercut recent optimism on the group and weigh on the shares. A stronger than expected outlook is likely to trigger a sharply positive stock reaction
  • Valuation: despite a stellar 2019 rally, the stock is still trading on a 9% discount to British and European broad sector retail peers. That compares to a 20% discount on average over the past two years, on a blended forward price-to-earnings basis. The rating reflects continued relative investor caution on Next. However, holders will seek to close the perceived valuation gap to the group’s rivals should it continue to outperform expectations
  • "Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

    Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."

    Original Post

    Latest comments

    Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
    Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
    Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
    It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
    Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
    © 2007-2024 - Fusion Media Limited. All Rights Reserved.