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Friday preview: Next results will be significant for whole UK high street

By Oliver Haill

Date: Thursday 22 Mar 2018

LONDON (ShareCast) - (ShareCast News) - High street clothing giant Next will take centre stake on Friday, having endured a rollercoaster past two years, with its shares falling almost 50% from the start of 2016 to a low last summer before rebounding around 30% since then
In January this year a Christmas trading update showed high street sales continuing to suffer, with full price brand sales growth of 1.5% from November to 24 December and like-for-like sales up 0.4%.

Retail revenue improved but was still down 6.1% compared to the 7.7% fall in the third quarter and 8.3% in the first half. Online growth improved to 13.6% versus 13.2% in the third quarter and 5.7% in the first half.

Guidance for profit before tax was tightened to a 718-732m range, giving a mid-point of 725m that would represent an 8% fall from the 790.2m a year ago. For 2019, guidance currently is for PBT of circa 715m.

Comments from Next boss Lord Wolfson carry much weight in the industry and will be picked apart.

"We look for an update on store cannibalisation from newer, larger stores and greater understanding of the returns profile of these larger units," said analyst Clive Black at Shore Capital.

"As ever, Lord Wolfson's read of both the UK Consumer and the wider economic outlook will make for interesting reading as will the comments that he makes at the actual results meeting on Friday morning. Next is regarded as a bellwether of the UK high street and has not been immune to the divergence in performance from its online and store channels."

UBS forecast EPS of 405p and given the 7% decline in earnings, expects the FY dividend to be held at 158p. Key issues are seen to include what measures Wolfson has to moderate the decline seen last year, plus the efficacy of further measures to improve online service levels.

George Salmon at Hargreaves Lansdown noted that Next had expected sales growth to firm up as online continues to deliver good results, with cost inflation seen easing and then disappearing over the course of 2018.

"All that bodes well - higher sales and higher margins mean doubly higher profits in the longer term. If all goes to plan the group expects to deliver 300m of spare cash next year, which it has suggested could be spent on a buyback. However, retail still accounts for a huge slice of sales, and with conditions remaining tough, it's likely to be far from plain sailing."

Looking at Next's shares, Michael Hewson at CMC Markets said there appeared to be some evidence that a base may have been found. But he said recent cold weather could prompt a revision of sales numbers and the results is likely to see continued caution over consumer spending habits.

MACRO MACHINATIONS

In Asia, Japanese consumer price data will kick things off, while there's US durable goods and new home sales data, Canadian retail sales and Canadian consumer price inflation.

Finally, what better way to finish the week than with central banker speeches from the BoE's Vlieghe, the Fed's Bostic Kashkiri and Rosengren.



Friday March 23



INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Durable Goods Orders (US) (12:30)
New Homes Sales (US) (15:00)

GMS

Ladbrokes Group Finance 5.125% Stg Bds 16/09/2022

FINALS

Henry Boot, M Winkworth, Next, Robinson

AGMS

Milestone Group

FINAL DIVIDEND PAYMENT DATE

easyJet, Henderson Opportunities Trust

INTERIM DIVIDEND PAYMENT DATE

Heath (Samuel) & Sons, Murgitroyd Group

QUARTERLY PAYMENT DATE

Real Estate Credit Investments Ltd, RM Secured Direct Lending, SQN Secured Income Fund , Tetragon Financial Group Limited, UIL Limited (DI)