Where next for Next?

Boardroom changes raise questions over the company’s sense of direction.

Next CEO Simon Wolfson
Source: Bloomberg

When Next announced its full-year figures the accompanying comments from the CEO, that he was more pleased with the previous year’s range, saw the shares sharply sell off. The boardroom of Next has been viewed as a breeding ground for senior management and has suffered as its members have been headhunted as a consequence.

The company has enjoyed unrivalled status as the most comprehensively covered online clothes retailer for some considerable time. The existence of an infrastructure already dealing with its catalogue sales saw the bones of an online offering already in place. Finally it appears that many of its competitors have caught up with the concept of how crucial the development of an online shop is.

Of course life at the top by definition means there is only one way you can go, and of course this is not about to happen overnight but the writing is on the wall that in order to maintain its current status it needs to keep improving rather than relying on historical achievements.

Even with so many questions hanging over the company the markets still have full-year pre-tax profits penciled in to increase by 36% up to £823 million. Questions over the company’s growth have seen institutional analysts temper their outlook with seven buy recommendations, 18 holds and three sells. The average price target for the clothing retailer over the next twelve months is 7322p just 1.4% above the current share price.

The shares might have struggled following some misplaced comments from management but the investment community still has an appetite for a mature profit-making company that offers an income as well as capital return, and although the 2.091% dividend yield is not as impressive as some FTSE stocks it is reliable. The 100-day moving average has offered good support and any further weakness would probably just entice renewed institutional buying.

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