ii view: Next lacks a positive catalyst

Clothing retailer Next again reports growth but fails to deliver a customary positive surprise. 

Half-year results

• Total sales up 3.7% to £2.06 billion
• Pre-tax profit up 2.7% to £319.6 million
• Interim dividend up 4.5% to 57.5p per share
• Full-year guidance unchanged

ii round-up:

Next (LSE:NXT) is a retailer of clothing and homeware. Next Online, generating nearly half of group profit, has over 5 million active customers globally and websites serving over 70 countries. 

Accounting for around one-third of profits, Next Retail operates around 500 stores across the UK and Ireland. Its outlets complement the online business - nearly half of UK Online orders are fulfilled through the store network. 

Next Finance, generating around one sixth of profits, currently provides £1.2 billion of consumer credit to enable customers to shop. 

For a round-up of these half-year results, please click here.

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, collecting and returning via its store network.

For investors, a roughly 50% gain in the share price year to date injects some near-term caution. Brexit overhangs consumer sentiment and the weather regularly plays its part in influencing demand. 

the company is clearly well managed and a current winner in a tough sector. But for now, a forward price/earnings (PE) valuation largely in line with the long-term average suggests the shares could be up with events. 

Positives: 

• Online sales up 12.6%
• Diversity of business including a consumer finance business
• Highly regarded CEO 

Negatives:

• Retail or store sales down 5.5%
• Management succession risk
• Factors outside of its control such as the weather can influence performance

The average rating of stock market analysts:

Strong hold