Next trading update: What the analysts say
Next kicked off the UK retailers' Christmas trading statements, recording a 3.8% rise in sales between 1 November and 24 December. The results led to the company nudging up its full-year profit forecast, now expecting full year profits to be between GBP611-625m (US$989m-1.12bn), against prior forecasts of GBP590-620m. Here is a flavour of what leading retail analysts say about Next's recent performance.
Conlumino analyst Joseph Robinson
"Next's performance underlines the trend of this festive season: namely that online has been the principal driver of growth and is paying dividends for those players that have invested in their online offer. Next is a very accomplished player in both the internet and multichannel arena and recent service improvements - such as extending order cut-off times for next day delivery to 9pm - were heavily featured in festive advertising and have subsequently helped to drive online sales.
"On the store front, growth is fairly anaemic and although it is in positive territory it is up against some very weak comparatives from last year when physical growth was negative. This, of course, has been the pattern of trading at Next for some time and will inevitably mean that like-for-likes will be negative. In our view, while this is not ideal it is not problematic so long as stores continue to serve a purpose. Most stores will be profitable in their own right and will continue to be so even if LFLs slip further; others may become less profitable, but will make a positive contribution to online sales whether as a showcase for product or as a destination for collection or returns. However, as trade continues to migrate to online, a third category may emerge: stores that are neither particularly profitable nor serve the multichannel interests of he company. Although we remain confident that Next is keeping a watching brief on this, it is something it will inevitably need to address at some point in the future."
Bank of America Merrill Lynch analyst Richard Chamberlain
"In retail, Next faced fairly undemanding comparatives but we think the strength of directory had some impact on the retail business, for which we estimate a LFL of -2% to -3% in Q4. We think Next continued to shift some stock out of retail into the directory business to be cleared at sale price, but we think the big shift of stock within the business has run its course, in both directions."
Charles Stanley analyst Sam Hart
"We expect trading conditions in UK general retail to remain challenging in 2013/14, with the consumer continuing to experience pressures and the competitive landscape intense. We see potential, however, for Next to continue to generate sales growth, given the strength of its product offer and excellent online proposition. Our expectation is for further steady growth in EPS and dividends in 2013/14."
Investec analyst Bethany Hocking
"FY13 guidance has been increased and we expect to upgrade profit before tax by approximately 2% and earnings per share by approximately 4%. FY14 guidance is provided: we don't expect our profit before tax forecast to change materially, but earnings per share will see a small upgrade. All in all a good statement from a much-loved stock, and we expect the shares to be strong today."
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