Shares in Next are a ‘hold’ as warm weather hits pre-Christmas sales

5th January 2016

As Next reports its fourth quarter results, Graham Spooner, investment research analyst at The Share Centre, explains what they mean for investors…

Next reported disappointing results for its fourth quarter on Tuesday, with full-price sales just 0.4%% ahead of last year.

Year to date sales of +3.7% have fallen below previous guidance, which predicted 4-6% growth. The retailer has blamed un-seasonally warm weather for poor sales, while poor stock availability and a competitive online environment also presented a considerable headwind.

However, it states that controls of margins, costs and stock should see full year profits in line with guidance.

These results, which have kicked of the retail Christmas reporting season, will have made the market nervous of how others have fared.

Looking ahead, investors should be aware that Next expects its business to remain ‘strongly cash generative’ in the year ahead. It has indicated that any share buybacks will have a price limit of £69.62 per share, based on the lower end of its profit guidance.

We continue to recommend Next as a ‘hold’ for medium risk investors seeking a balance of growth and income as the company continues to expand its stores and online presence, as well as returning a significant amount of cash to investors in the form of special dividends and buybacks…

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