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Old faithful Next doesn't disappoint

High street retailer Next has issued yet another positive trading update, coupled with a massive profit upgrade.
July 30, 2014

Next's (NXT) propensity for issuing earnings upgrades has become so common that analysts have come to expect nothing less of the high street retailer. And, true to form, it has once again reported better-than-expected half-year trading, prompting a hefty boost to full-year profit forecasts.

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Brand sales in the first six months rose 11 per cent, which means the company is running well ahead of the 5.5 per cent to 9.5 per cent full-year guidance it issued back in April. Nevertheless, cautious as always, management is steering analysts towards a 7 to 10 per cent sales growth range. The reason is that comparisons grow tougher in the second half, as demonstrated in the chart below, while the first two quarters enjoyed reasonably soft comparatives. Meanwhile, management has raised its full-year profit guidance by a whopping £25m to between £775m and £815m. That equates to growth of 11 to 17 per cent, rates which Next's peers can only dream of.

As planned, a third and final special dividend payment of 50p is to be paid out this week. Together with two previous payments and share buybacks, Next will have returned £328m to shareholders by the year-end, just above its £325m target. No further payments are expected, unless the share price falls back below the buyback limit price of 6,600p.

Next share price chart for past three years