Next raises guidance, shares jump

Investing.com -- Shares of Next Plc (LON:NXT ) rose over 2% on Tuesday after the retailer raised its full-year guidance, following a stronger-than-expected trading performance over the key November and December period. 

The company upgraded its profit forecast for FY24/25 to £1.01 billion, along with an improved earnings per share target of 635.4p, exceeding both its previous guidance and analysts’ expectations.

Next’s sales during the holiday season were robust, with full-price sales increasing by 6.0%, well above the prior forecast of 3.5%. 

This growth was largely driven by online sales, which rose by 6.1%, while retail sales saw a modest decline of 2.1%. 

The company also reported a £75 million reduction in its net debt, bringing it to £625 million, highlighting strong cash generation.

Next has set a cautious yet solid outlook for FY25/26, forecasting 3.5% growth in full-price sales and a profit before tax of £1.046 billion. 

The company anticipates domestic sales growth of just 1.4%, but international markets are expected to rise by 14%.

Analysts at Jefferies noted the company’s cautious stance on both UK and international performance, but praised its ability to deliver strong results despite a challenging retail environment. 

Jefferies also pointed out that the retailer’s expanded online picking capacity at its South Elmsall site will help to meet increasing demand while maintaining solid cash flow.

With its 2025 PE ratio under 14x, Next remains attractively valued, leaving room for further upside as the market continues to recognize its improved growth prospects.

“NEXT should benefit from further real wage growth in the UK albeit it will remain somewhat sensitive to the outlook for the cost of borrowing for the consumer. Over the long term we believe that it should be able to achieve a higher rate of sales growth than the 2% that it has achieved historically,” said analysts at RBC Capital Markets in a note.

Source: Investing.com