Next reported surprisingly good sales this week … here’s what the market said about it
Next Plc (LSE:NEXT) was a standout UK stock this past week, with a ‘surprise’ strong performance revealed in Thursday’s trading update.
Outsized growth abroad was the focus of a lot of the analysis, whilst in the UK, the retailer had to contend with cost-of-living concerns and wash-out weather
Anyway, without further ado, here's what the market had to say this week about Next:
"Continues to defy expectations"
Deutsche Bank analyst Adam Cochrane, lifted the German bank’s forecasts and price target to 9,500p (versus current price of 9,506p),so still kept to a ‘hold’ rating despite the surprising positive print.
"Next pulled another rabbit out of its hat in 1H with its International sales up 23% year-on-year, delivering a c.£85 million increase in sales in the period, which equates to c.75% of the total Next brand sales growth of c.£110 million,” he said.
"A deserved premium"
At Peel Hunt, analyst Ruben Pathmanathan highlighted the particularly strong international performance, whilst noting that the UK ‘was more in keeping with expectations’.
“Another strong performance from Next against a weak market backdrop,” the analyst said in a note.
“The shares trade on a sector premium of c.15x PE, which we view as deserved."
"Next Delivers Once Again"
Russ Mould, investment director at AJ Bell, reckons Next hasfound the magic ingredients to deliver strong returns – and like the other experts, highlighted the outsized growth abroad.
"Next has a reputation for under-promising and over-delivering, and it’s delivered the goods once again,” Mould said in a note.
“While the first half of 2024 has been miserable for the UK retail sector due to unfavourable weather, Next has once again grabbed a slice of consumer spending, helping to make up for a challenging time earlier this year.”
"Its a great achievement"
Shore Capital retail analyst Clive Black, meanwhile, added the context of Next’s role as a ‘bellwether’ for the broader sector - and described the firm’s better-than-expected numbers as a “marvellous” achievement.
"Next's Q2 trading statement carries more weight than usual as it directly comments on the UK apparel trade through a challenging market.
“To beat its own expectation for sales by 3.5%, to deliver positive sales year-on-year, and raise its FY25 PBT guidance by £20m is a marvellous achievement.
“Next's shares are reasonably full-rated but with such reports, its sector premium for its equity is merited, and the shares have the basis to go better still. Top marks!”
Overall, a market-defying performance
Well, gist was quite clear … the retailer has done a good job executing in a tough market, albeit investors probably ought to exercise some caution given the share price is already up some 38% over the past twelve months and, as the analysts point out, its valuation is quite “full”.
How ‘full’ is hard to pinpoint, but they at least reckon Next is worthy of this premium rating.
