Interactive Investor

ii view: Next doing better than expected

High street retailer Next has upgraded its full-year guidance, giving investors reason to buy.

31st July 2019 14:47

Keith Bowman from interactive investor

High street retailer Next has upgraded its full-year guidance, giving investors reason to buy.

Trading update for 26 weeks to 27 July 2019

  • Full price sales up 4% on last year
  • Full-year sales guidance increased from +1.7% to +3.6%
  • Full-year profit guidance increased by £10 million to £725 million (+0.3% on last year)
  • Earnings per share guidance up from +3.4% to +5.2% on last year

ii round-up:

The retailer traces its history back to 1864 and J Hepworth & Son, a gentleman's tailors established in Leeds. In 1982, the first Next (LSE:NXT) womenswear store was opened.

Today, the company operates around 500 stores across the UK and Ireland. Its online business boasts over 5 million active customers globally. Its websites serve over 70 countries.

For a round-up of its second-quarter trading update, please click here.

The share price was up over 8% in mid-afternoon UK stock market trading. 

ii view:

Next is a highly regarded retailer both on and off the high street. Management were quick to spot the trend towards online sales. Its Directory business has grown to offer both the convenience of ordering online and, if necessary, returning via its store network.

For investors, a 50%-plus gain in the share price year-to-date implies a lot of good news is in the price, injecting some near-term caution. Brexit also overhangs consumer sentiment and the weather regularly plays its part in influencing clothing demand. 

Next is clearly well managed and a current winner in a tough sector. But, for now, a forward price/earnings (PE) valuation largely inline with the long-term average might suggest that the shares are up with events. 

Positives: 

  • Highly regarded management team 
  • Strong online and high street presence  

Negatives:

  • Management succession risk
  • Factors outside its control like weather can influence performance

The average rating of stock market analysts:

Strong hold

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