Next profit forecast is raised, but “good news is already priced in”

28th October 2015


As Next updates the market, Ian Forrest, investment research Analyst at The Share Centre, explains what it means for investors…

Clothing group Next provided a third quarter trading update this morning which showed a 6% rise in full price sales. Next said comparative figures from last year were weak, but consumer demand remained volatile through the summer. Investors should acknowledge however, that full year profit guidance was slightly adjusted with the bottom range figure of £805m, raised to £810m.

These are good figures from Next as they show sales in the upper half of the range previously given, with good momentum across both the high street and catalogue business. Investors may be concerned that there was no further mention of the impact of the new living wage, but that may come with full year results next spring. The shares have outperformed the market over the past six months and shareholders will receive a further special dividend shortly.

We continue to recommend Next as a ‘hold’ for medium risk investors as the company continues to expand its stores and online presence, but there’s a lot of good news already priced into the stock. For investors interested in the sector, we prefer Marks & Spencer due to its more attractive valuation and profit growth potential.

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