Next set for record results

Next will announce its full-year figures on Thursday 19 March, and the market is anticipating record numbers from the retailer.

Shoppers on an escalator
Source: Bloomberg

In July Next increased its full-year outlook, and in September the company impressed traders by posting a 19% jump in first-half profits. Next’s share price hit an all-time high this month as the company made headway into 70 new countries via its online shop, one of which was China – the second largest economy in the world.

The bulk of Next’s stores are in the UK and Ireland, and the company won’t be caught out again by the unusually long summer we experienced last year; it now buys stock for all four seasons, as opposed to the more traditional model of bulk buying for two seasons. The entire UK clothing sector was hit by the unseasonably warm autumn, but Next is now equipped to tackle the unpredictable British and Irish weather.

Next’s middle-of-the-road pricing policy has proved to be popular with the public, and now the company is setting its sights a little higher by competing with Marks & Spencer’s Autograph label. The company’s CEO Lord Wolfson said the retailer will be targeting the higher end of the clothing market, which in the past it has ‘shied away from’.

Marks & Spencer revealed a dip in its clothing revenue for the Christmas period and the department has been a drag on the remainder of the group. Next is using M&S’s weakness as an opportunity to break into a market that the latter has a strong foothold in.

The consensus for the retailer’s full-year figures is for revenue of £4.02 billion and adjusted net income of £615 million. These forecasts represent a 7% increase in revenue and an 11% increase in adjusted net income. The retailer will also announce its second-half figures on the same day, and dealers are anticipating revenue of £2.11 billion and adjusted net income of £363 million. The company’s first-half figures were broadly in line with estimates. The revenue was £1.85 billion and the adjusted net income was £257 million, while traders had forecasts of £1.84 billion and £258 million respectively.

Equity analysts are bullish on Next, and out of the 30 recommendations, six are buys, 20 are holds and four are sells. The average target price is £70.03, which is 5% below the current price. Investment banks are also bullish on its rival Ted Baker. Out of the seven ratings, six are buys and one is a sell. The average target price is £24.93, which is 2% below the current price.

The share price has been rising steadily since 2008 and the initial target is the record high of £75.97. A move through the aforementioned level will put £80 in sight. Should the stock drift lower it will provide buying opportunities. The first level of support will be found at the 200-hour moving average of £74, and if punctured the next level of support is located at the £73 level. 

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