October’s warm weather sees sales at Next come in ahead of guidance

• Q3 sales up by 2%, slightly ahead of guidance.
• Year to date sales up by 3.5%, as strong sales in July are likely to have pulled forward potential sales from August.
• October sales were strong due to temperatures returning to seasonal normality.
• Shares drop 3% in early trading but this could be due to a broker downgrade and group reporting Q4 sales not likely to be as strong as October.
• Despite this, management keep guidance for full year sales growth of 3.6% and profits before taxes of £725mn.
• With a relatively high level of debt to contend with and overall state of UK retail and economic environment, we can only recommend the shares as a ‘Hold’ at best.

Like most other retailers, Next is facing challenging conditions on the UK high street, but unlike some of its rivals, it has made great inroads into becoming a leading online player in the clothing market with over half of its sales generated over the internet. Its designs seem to be appealing and the company is making good progress in its international expansion with China being eyed as a huge opportunity. 

The news flow surrounding Next is certainly not dire like most of its traditional peers, but the online market it is going to face stiffer competition from brands such as ASOS and Boohoo who are expanding even more aggressively.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.