The outlook from Next (NXT) chief executive Lord Wolfson is less than inspiring. The respected retail boss said 2016 would be a challenging year with "much uncertainty in the global economy". He pointed out that although employment rates are at an all-time high, growth in real earnings has slowed significantly since late last year, and growth in output across services, manufacturing and construction have all decelerated. Additionally, it's also the company's view that there may be a cyclical move away from spending on clothing, back towards experience-based segments such as eating out and recreation.
More specifically, bosses reckon core sales could land anywhere between shrinking 1 per cent and growing 4 per cent this year, although a colder winter could provide strong upside to those numbers. That equates to a profit range of £784m to £858m, which has forced some analysts to trim forecasts. Peel Hunt took the opportunity to downgrade pre-tax profits forecasts by £20m for the current financial year to £840m, giving EPS of 448p, compared to £821m and 443p in FY2016.
A quick review of last year's numbers. The group's net debt was roughly £180m higher than expected, largely due to the pulling forward of a £151m portion of the share buyback programme and to fund the additional Next Directory debt of £215m which had been caused by the change in minimum payments for customers. Retail sales moved up 1.1 per cent, with a minor improvement in margins as the buying team exceeded targets, and a helping hand from currency rates. Directory sales also moved 7.7 per cent in the right direction despite second-half stocking issues as more customers chose to purchase goods from the mid-season brochure instead of the larger seasonal catalogues.
The directory is going to be a big focus for the group this year. Sales have grown by 75 per cent over the past five years, but growth has slowed as competitors have caught up in terms of online delivery and warehousing capability.
| NEXT (NXT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 5,890p | MARKET VALUE: | £8.61bn | |
| TOUCH: | 5,885-5,890p | 12-MONTH HIGH: | 8,102p | LOW: 5,775p |
| DIVIDEND YIELD: | 2.7%** | PE RATIO: | 13 | |
| NET ASSET VALUE: | 213p | NET DEBT: | 273% | |
| Year to 31 Jan | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 3.44 | 580 | 258 | 90 |
| 2013 | 3.56 | 667 | 320 | 105 |
| 2014 | 3.74 | 695 | 366 | 129 |
| 2015 | 4.00 | 795 | 428 | 150 |
| 2016* | 4.18 | 836 | 451 | 158 |
| % change | +4 | +5 | +5 | +5 |
Ex-div: 7 Jul Payment: 1 Aug *53-week period **Excluding 230p in special dividends | ||||
