29th Mar 2023 13:23
(Alliance News) - Next PLC shares suffered on Wednesday, with markets disappointed that the clothing and homewares retailer decided against lifting cautious yearly guidance.
Next shares traded 5.0% lower at 6,388.00 pence each in London on Wednesday afternoon.
The company has a developed a reputation for expectation management.
"One might assume that Next Chief Executive Simon Wolfson has one of these signs on his office door saying 'under-promise, over-deliver'. He is one of the few corporate leaders who never tries to make a situation look better than it is," AJ Bell analyst Russ Mould commented.
The reputation for over-delivering led to hope that Next would lift guidance on Wednesday. That was not meant to be, however.
It still expects full price sales to decline 1.5% in the year to January 2024. Pretax profit is to fall 8.5% to GBP795 million.
For the year just gone, pretax profit edged up 5.7% to GBP869.3 million from GBP823.1 million. This beat Next's guidance of GBP860 million. Revenue rose 8.8% to GBP5.03 billion from GBP4.63 billion the year before.
Analysts at Swiss bank UBS said that investors had expected a "modest upgrade today".
"That said, Next's trading update for the first eight weeks of [financial 2024]... suggest that the GBP795 million pretax profit guidance is realistic," UBS analysts added.
Next said that full price sales in the last eight weeks were down 2.0% year-on-year.
Shore Capital Markets believes Next has a "difficult year ahead".
"Although the business has achieved steady growth in EPS over the last twenty years, the company's recent performance has been lacklustre. Despite weathering significant shocks over the past eight years, including the shift from retail to online, the pandemic, and the cost-of-living squeeze, the company's [earnings per share] growth rate in the years ahead is expected to be modest. With profits set to decline, we question its prospects for longer-term growth. Although the company is focusing on online growth, cost management, and investing in technology and infrastructure, we are not fully confident that these initiatives will deliver growth for shareholders," the broker said.
By Eric Cunha, Alliance News news editor
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