Is Next Falling Further Out Of Fashion?
Spreadex | Mar 16, 2018 10:14
The high street staple spent 2017 gapping all over the place, with pretty huge movements greeting each of the year’s trading statements. From a starting point of £49.12, the stock saw 13 month highs of £53.55 and post-Brexit lows of £36, before settling at a closing price of £45.19, an 8% decline year-on-year.
Since 2018 began Next has largely moved between £47.50 and £50, with one spike towards a 4 month high of £52.50 at the end of January. The stock now sits at a current trading price of £48.12.
The reaction to the firm’s most recent updates captures how uncertain investors are of Next at the moment. Back at the start of November the stock plunged 9.5% in a single session as it warned of ‘extremely volatile’ trading. There the divergent performances of its Retail (i.e. high street) and Directory (including online) divisions was in full force; the former saw a 7.7% decline across the third quarter, but with the latter’s 13.2% increase allowing total Q3 full price sales to nudge 1.3% higher.
Cut to January and the stock was jumping 6.5% off the back of a set of figures not that much better than what was posted in November. For the fourth quarter full price Retail sales fell 6.1% while Online sales jumped 13.6%, resulting in a 1.5% increase in total sales.
The key difference between those 2 updates was that January’s statement also came with some revised full year estimates. Next now expects its total full price sales (including currency gains) to rise by 0.3% across 2016/17, a switcheroo on its previously estimated 0.3% decline. More importantly the company forecasts its group pre-tax profit will fall 8.3% to £725 million, not 9.3% to £717 million, with yearly earnings per share looking at a 5.7% drop.
As for the year to January 2019, Next is expecting a 1% increase in full price sales and a 1.1% jump in EPS, but with a 2.8% slip in pre-tax profit to £705 million. Any update on these forecasts will be welcome next Friday.
Next PLC (LON:NXT) has a consensus rating of ‘Hold’ alongside an average target price of £44.10.
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