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​​​Next PLC share price in focus ahead of Q4 trading statement

​​​Fundamental and technical analysis on the Next share price ahead of Thursday’s fourth quarter trading statement.

Chart Source: Bloomberg

​​​Next Q4 trading statement to shed light on progress

Next, the fashion, homewares, and beauty products retailer, is currently excelling in both physical stores and online sales, helped by the company's management team which is entrepreneurial and constantly seeking new ways to expand the business.

​The recently released half-year results report exceeded the directors' expectations, with modestly positive figures for sales and profit growth. The directors attribute this success to easing inflationary pressures and a resilient consumer demand, which is supported by a strong employment market.

​Next has been able to recruit more easily due to a softening labour market and the implementation of labour-saving automation and systems improvements. These advancements have reduced the need for new hires in areas such as warehousing and contact centres. The company's overall outlook is cautiously optimistic, and its reputation for under-promising and over-delivering is well known.

​While other online operators like ASOS and Boohoo.com plc have struggled, Next has been winning the online race. Around 60% of its sales come from the online channel, compared to just 35% from traditional stores.

​The online business is a significant driver of Next's current success and is expected to fuel further growth in the future. The company has invested in its online operation, optimising execution through initiatives such as the introduction of a new warehouse and the modernisation of online software.

​Next aims to achieve growth by expanding overseas and developing new product ranges outside of the Next brand. The company's Total Platform and Total Enterprise Platform initiatives aim to create additional value from its proprietary technology and online infrastructure. Although these sub-businesses are in their early stages, they have the potential to drive growth and act as tools for mergers and acquisitions.

​Next’s price-to-earnings (PE) ratio of 13.8x is below the UK market’s 15.1x with earnings forecast at around 1.5% per year but the company has an unstable dividend record, has seen significant insider selling over the past three months and has a high level of debt.

​It has also to be noted that the retail sector is sensitive to economic cycles, and Next may face challenges in achieving its growth ambitions, something Thursday’s fourth quarter (Q4) trading statement may be able to shed more light on.

​Technical analysis on Next share price ahead of Thursday’s Q4 trading statement

​Next’s share price, down around 2% year-to-date but up by 34% over the past year, surpassed its 8,170 pence 2015 peak in December but didn’t manage to make a new all-time record high above its September 2021 peak at 8,472p.

Next Monthly Chart

Next Monthly Chart Source: TradingView
Next Monthly Chart Source: TradingView

Even though the Next share price seems to be topping out in the short-term amid general risk-off sentiment due to pared back rate cut expectations at the beginning of the year, its October-to-January uptrend looks solid. This should remain the case while the 55-day simple moving average (SMA) at 7,645p and the September high at 7,460p offer support.

Next Daily Chart

Next Daily chart Source: TradingView
Next Daily chart Source: TradingView

​A rise above the 8,284p December peak would put the May to December 2021 highs at 8,404p to 8,472p on the plate. Above this resistance area beckons the 8,500p mark.

​Analysts recommendations and IG sentiment

​Fundamental analysts are rating Next as a ‘hold’ with Refinitiv data showing 4 strong buy, 6 buy, 12 hold, zero sells but 1 strong sell - with the mean of estimates suggesting a long-term price target of 7,768 pence for the share, roughly 3% below the share’s current price (as of 3 January 2024).

Next analysts Source: Refinitiv
Next analysts Source: Refinitiv

​IG sentiment data shows that 64% of clients with open positions on the share (as of 3 January 2024) expect the price to fall over the near term, while 36% of clients expect the price to rise. Trading activity today shows 57% of buys and this week 68% of buys. This number needs to be taken with a pinch of salt, though, as today is only the second trading day of this week.

IG Next sentiment Source: IG
IG Next sentiment Source: IG

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