Beaufort Securities' View



"This morning Next published a good Christmas trading update. In November the board guided Christmas sales to be down -0.3%. However, Christmas period sales were up 1.5%. This resulted in a small increase to FY18 (to Jan) PBT guidance from £717m to £725m. Note the shares trade ex-div of a 45p dividend tomorrow.

The shares were up strongly on this news, mainly due to the better than expected sales growth but probably also due to a mini short squeeze (Next is one of the most shorted stocks 6.8%). But the outlook statement is less positive, highlighting the pressures on high street retailers and the UK consumer, and guiding FY19 profit of £705m (down 3% on FY18?s £725m guidance).

This theme is likely to sustain and although Next?s significant on-line business is growing, as a group the top line is declining. We prefer to avoid negative growth companies. Long term we expect the shares to underperform and change our recommendation from HOLD to SELL""

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