Proactive Investors - Citi said it expects Next PLC (LON:NXT) to exceed its own sales guidance in the crucial, Christmas-focused fourth quarter with Reiss as its "little helper".
The investment bank is predicting full-price sales of 4% - double the number put in the market by the clothes retailer. Citi does admit, however, that it is working with a limited dataset.
Looking forward to the fiscal year ending in January 2025 (FYJan25), Citi tentatively predicts a 2% rise in full-price sales for Next.
Additionally, it expects a mid-single-digit percentage (MSD%) increase in year-over-year earnings per share (EPS), influenced by Next's mergers and acquisitions (M&A) activities, particularly with fashion brands Reiss and FatFace.
However, Citi remains cautious regarding Next's stock valuation. Currently, the shares are trading at 15 times and 14 times the expected earnings per share for the fiscal years ending in January 2024 and 2025, respectively.
This valuation is considered high compared to historical standards and when considering that Next's organic earnings before interest and taxes (EBIT) are expected to remain relatively unchanged.
Citi’s analysis suggests a wait-and-see approach, as the retailer navigates the upcoming fiscal year with these strategic partnerships.
In morning trade, Next shares were trading sideways at 8,026p.