Next plc Ordinary 10p Shares (NXT)

Company overview

Next PLC is a British retailer with its headquarters in Enderby, Leicestershire. It is one of the United Kingdom's largest clothing retailers. The company has over 500 stores throughout the UK and the Republic of Ireland, and more than 180 branches in Europe, Asia and the Middle East. These are located at a mixture of high streets, shopping centres, and retail parks. Next sells some of its merchandise through the Next Directory, a home shopping catalogue launched in 1988. Other businesses include Next Sourcing, which designs, sources and buys Next branded products. The company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

HL Comment (4 January 2012)

High street and online fashion retailer Next PLC announced its post Christmas trading statement earlier today (4 Jan 2012). The group’s branded sales were up 3.1%, driven by a strong performance in Next directory, whilst retail store sales fell short of expectations, down 2.7% after high-street sales were constrained by the difficult consumer environment. The company said, however that it remained within its full-year guidance for sales to rise between 2% and 4.5%, although it narrowed its profit guidance to between £558 million and £572 million, (from an earlier range of £550 million to £585 million). The group’s definitive retail sales figures for Christmas are yet to be announced, (unlike some retailers, the company does not discount its products until Boxing Day). More detailed information will be announced within the group's full year results around 22 March.

Negative Points:

• Given the weakness in the consumer environment, Next is budgeting for modest growth in both Next brand sales and profit.
• U.K. consumers have been hit by rising food, fuel and utility bills at a time when job security concerns and government austerity measures are also taking their toll on consumer confidence.
• Continuing difficulties in the Eurozone and related issues of business and consumer confidence are cause for concern.

Positive Points:

• Next's directory business continued to be a strong performer, reporting a 16.9% growth in sales.
• Next confirmed that its own selling prices will remain stable over the coming year.
• Next remains a cash-generative business.
• The retailer plans to grow its directory online business, both in the UK and overseas.
• The group anticipates generating £200 million of surplus cash after capital investment, tax and dividend payments. The group said it intends to return this to shareholders in the form of share buybacks.

Consensus:

On balance, market consensus remains a strong hold.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.