Next Plc is continuing on its upward trajectory – evidenced by a 16.9% increase in annual profit after tax. And analysts appear to be as equally upbeat as the UK fashion retailer about its performance in the year ahead.
Conlumino analyst Anusha Couttigane
“Next’s dazzling full year results will come as little surprise to most people. The retailer continues to far outshine its peers in the British fashion market, growing steadily in both profit and popularity, the latter helping it to record total sales of GBP3740m by the close of the year.
“The secret to Next’s success is the retailer’s frequent self-evaluation and the swift implementation of strategies to mitigate potential pitfalls. Whatever areas of weakness highlighted in the past – a failure to merchandise adequately for changeable weather conditions, the tendency to rely on ‘safe’ designs – are now being highlighted as key areas of improvement by the retailer.”
Bernstein Research analyst Jamie Merriman
“Next’s results reflect continued strong performance and an exceptional fourth-quarter. Consistent with management guidance, we expect sales growth to accelerate in the coming years given improvement in the outlook for the UK consumer and growth in international directory. Also consistent with management’s guidance, however, we expect total shareholder return in the coming year will be strong, but below the average delivered over the last four years.”
Bank of America Merrill Lynch analyst Richard Chamberlain
“Next Directory continues to benefit from its fast, highly automated systems and from improvements to service options. This now generates c.38% of sales and more than half of group profit. Next almost doubled its international Directory sales to GBP101mn but with a slightly lower net margin of 18% vs 19% in fiscal 2013 due to keener pricing. It is budgeting for 50% sales growth and for net margin to remain stable fiscal 2015.”
Cantor analyst Freddie George
“Final results to the end of January were broadly in-line with expectations and we believe the positive momentum seen over Christmas continued through January.
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By GlobalData“We are retaining our buy recommendation but increasing our TP to 7,200p from 6,500p for the following reasons: 1) Over the last five years, Next’s EPS has grown by 17.7% pa helped by positive momentum from the Directory, which has achieved 18.1% pa growth in trading profits over this period. 2) Management, in our view, are beginning to recognise that the valuation of the Directory, following recent IPOs, in particular Boohoo.com, is not properly reflected in the Next rating. Interestingly, the company has recently launched a standalone website, Label, selling the Directory’s external brands, such as Superdry. The Directory will continue to benefit from growth in the on-line market, an increase in customer numbers, a broadening of the ranges and the opportunity to develop overseas.”
