Next (NXT) share price weakens on Wednesday despite reporting a 17% rise in full-priced sales.
The retailer released a trading statement today to give market guidance on its recent operations. The biggest takeaway from the RNS is the company is maintaining its “Q4 full price sales guidance at +10% and full year profit before tax at £800m.” Moreover, Next’s online sales have rocketed by 40 percent in the first ten months of the year.
However, the market is overlooking these gains because of a potential slowdown in the run-up to Christmas. In particular, Next predicted that the “effects of pent-up demand are likely to continue to diminish.” This caused Next’s share price to drop by more than 2 percent in early morning trades.
Against the backdrop of rising energy prices and supply chain disruption, the retailer anticipates some choppy trading in the near term. Margins may be compressed.
At the time of writing, Next share changed hands at around the 8,000p mark.
Next has been one of the winners from the pandemic.
The retailer share price soared last year despite the mass closures of stores. In fact, Next touched new all-time highs earlier this year.
However, the past six months saw some boring sideways trading, which few could profit from. The upward momentum from last year has largely dissipated; a decisive upside breakout from here is need to resuscitate buying interest.
On the downside, a failure to hold the 7,500p range floor would signal that a top has been established. Watch to reduce the stock if this happens.
The retail industry in the UK is a brutal and competitive one. Many retail stocks have fallen by the wayside over the years.
Next, however, proved to be a long-term success story. It prospered during the boom times, and weathered the recession and the pandemic successfully. Its market capitalisation of £11 billion is more than doubled that of Mark & Spencer’s (MKS).
According to a panel of 20 analysts and brokers, 11 analysts are forecasting Next as ‘Outperform’ or ‘Buy’. Another 8 is rating Next as ‘Hold’. The most bullish price target is at the around number level at 10,000p.
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