Thursday 22 March 2018

Shares fall as investors don't buy into Next sales line

The Next summer collection
The Next summer collection

Next Plc maintained sales momentum in the third quarter, but that wasn't enough for investors used to the UK retailer's outperformance of peers.

Next shares fell as much as 2.3pc in London, even as the company slightly raised the lower end of its full-year profit outlook. Sales of full-priced Next brand items rose 6pc in the quarter, a figure that analysts said was flattered by comparison with a weak result a year ago. Consumer demand for its sweaters and jeans also remains volatile, it said.

"October was not exactly a blow-out, despite weak comps," Nick Bubb, an independent retail analyst, said.

Next has beaten analysts' profit estimates in all of the last 10 years, giving investors high expectations of the fashion retailer. The stock trades on a multiple of 18 times prospective earnings, according to estimates compiled by Bloomberg, compared with 14 times for Marks & Spencer.

Sales growth of 6.2pc in the Next Directory home- shopping unit was also below estimates, weighing on the stock. "The results are slightly disappointing, particularly in terms of sales for Directory," which has been "slowing down a lot," Tony Shiret, an analyst with Haitong Securities in London, said.

British retailers are under pressure to attract and retain customers, despite a recovery in the economy. With more than 500 outlets across the UK and Ireland, Next, the UK's largest clothing retailer by market value, is ploughing ahead with store expansion as rival Marks & Spencer grapples with falling fashion sales and management flux. (Bloomberg)

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