Stock of the day 09/09/2015 – Next PLC

Despite a few wobbles here and there it’s been a pretty spectacular year for Next; where some of its clothing rivals may have faltered the Leicestershire-based company has soared.

Can that trend continue with its half year 2015 results on Thursday?

Next opened the year at £67.98, and soon kicked off an impressive run that saw it reach £73.38 by the end of January. Things didn’t slow down across February, and the stock had grown to £75 by the start of March. However, its preliminary full year results on the 19th March caused a bit of a problem for the company; despite a 12.5% jump in pre-tax profit to £782.2 million for the year ending January 2015, complete with Next’s sales growing 7.2% to cross the £4 billion mark for the first time, its forecasts going forward troubled investors. For the year ending January 2016 Next cut its sales growth expectations to between 1.5% and 5.5% from the previously stated 2.5% to 7.5%, with a pre-tax profit estimate of between £785 million and £835 million.


(Source: IT-Finance.com 09/09/2015)

This downward revision caused the Next to have a dismal end of March, falling all the way back to £70 by the start of April. Since then, however, Next has grown a decent clip, if at a slower pace than its explosive 2 and a half month run at the start of the year. In initial impetus for this came at the end of April, as the stock had climbed back to £73.58 after a strong Q1 trading statement that saw Next post a 4.1% in total revenue and a 3.2% jump in total sales (with in-store sales growing 0.5% to the combined 9.2% increase by its online and Directory division).

The month of May for the UK markets is a well-worn story by now, and Next was one of the many recipients of a post-Tory win boost on May 8th, growth that continued throughout the month as the company closed above £75 for the first time since the day before its full year report in March. A rocky June then saw the stock end the month not much higher than £75 after having fallen to £72.18 by the 10th, whilst the market-wide volatility across July meant on the eve of its Q2 report Next had only managed to briefly sneak near £77.

Yet Next was in luck; like its Q1 report, the company’s second quarter figures impressed investors, with a 3.3% increase in total sales (with the online/Directory division once again outshining the company’s brick-and-mortar sales) and an upwards revision of its full year sales forecasts to 3.5% to 6% from 1.5% to 5.5%. This statement gave Next a stellar start to August, and culminated in a 2015 (and all-time) high of £81.65 by the middle of the month. Of course, Next couldn’t escape unscathed from the recent market volatility (as well as a ratings cut from Credit Suisse), and after at one point hitting a low of £72.90 is at a current trading price of £75.75 (IT-Finance.com, 09/09/2015).

Next has a consensus rating of ‘Hold’ and an average target price of £74.79.