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Next share price: what to expect from half-year results

After an impressive rally in the first half of the year, Next has recovered from a mid-year dip to push to its highest level since 2015.

Next CEO Simon Wolfson Source: Bloomberg

Next half-year results: what does the City expect?

Next is expected to report first-half (H1) pre-tax profit of £318 million, down from £411.8 million a year earlier. Meanwhile, revenue is forecast to drop to £2.02 billion from £2.26 billion last year. The retailer has seen a continued fall in sales in its bricks-and-mortar division, putting pressure on many stores which have fewer than five years of their leases remaining. Growth continues to come from the online division, with new Marketplace and Label brands widening the base of shoppers on which Next can draw.

Overseas expansion has become a key growth driver for Next, which should help offset a sustained store closure programme in the UK, which may become unavoidable in coming years if revenue continues to decline at its physical stores.

At 13 times earnings, Next is valued in line with its five-year average, having seen the valuation drop to a multi-year low at the end of 2018. However, it remains far cheaper on a price-to-earnings (PE) basis than in the heady years of 2012-2015, when the share price rocketed to £72.

Next share price: technical analysis

Next has shaken off its period of weakness from 2015 until 2017 and has pushed steadily higher, moving through the July 2018 highs above £60.00.

This clears a path to the highs last seen in the H2 of 2015, when the shares pushed on to £72.00. The shares have endured a volatile time, dropping to a low of £38.00 in December 2018, when they traded at just 8.9 times earnings. This ‘bargain basement’ opportunity then saw an impressive rally, which endured a pause in June with a drop towards £52.80, before a continuation of the gains took the price to a new high.

July and August saw the price gap higher, but then it dropped back to £56.20, creating a fresh buying opportunity. In the longer term, £63.65 and then £72.00 are upside targets, while a move below £52.80 is likely to dent the bullish these in the medium term.

Next chart Source: ProRealTime
Next chart Source: ProRealTime

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