Next share price falls on forecast downgrade

on Dec 19, 2013
Updated: Oct 21, 2019
Listen, Thursday, December 19: Next (LON:NXT) yesterday saw its share price fall after Oriel Securities downgraded its forecasts for UK fashion retailers amid fears that heavy discounting and low wage growth will hit Christmas spending this year.

Shares in Next, Britain’s second biggest clothing retailer, yesterday closed 1.02 percent lower at 5,335p, valuing the company at £8.27 billion.
Oriel Securities analyst Jonathan Pritchard highlighted in a note that consumers are “choosing to spend only when forced” and a “lacklustre” October and November in fashion was due to mild autumn weather that has left shops nursing piles of unsold coats and jumpers.

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“The weather has been decidedly unhelpful and already most high street stores are discounting heavily (and more than last year). We expect that ultimately the disappointments will come on gross margins rather than sales,” Pritchard commented.
Besides Next, Oriel downgraded M&S, Debenhams, Sports Direct and Mothercare.
Faced with unsold stock, retailers are offering discounts of up to 50 percent to attract reluctant shoppers, “judging that stock cleared at this level of discount before Christmas may avoid more damaging and deeper discounts in January,” Pritchard said.

New data from Springboard shows that footfall on UK high streets was two percent lower last week than a year earlier, with shopping centre footfall down 2.3 percent. However, week-on-week footfall increased by 0.4 percent on high streets and 5.5 percent at shopping centres.

According to new data from Visa Europe, however, retailers’ hopes for a late surge in Christmas shopping may be dashed. Next Monday, December 23 is expected to be the busiest shopping day of the year with customers taking the whole week off work but Visa expects that shoppers will spend £1.2 billion on its cards on that day, the same as last year.

Looking ahead, Pritchard said that it is far from certain that a potential rise in consumer confidence next year “will be sufficient to give turnovers the boost they need to aid operational gearing and deliver forecasts.”
Next trades from over 500 stores in Britain and Ireland and about 200 stores in over 30 countries overseas, as well as through its Directory internet and catalogue business. In October the company raised its full-year pre-tax profit target after third-quarter sales growth exceeded analysts’ expectations. Total sales rose 4.3 percent in the third quarter, while analysts had expected a 2.9 percent gain. Next increased its pre-tax profit target for 2013-14 to £650-£680 million, a rise of 4.6-9.4 percent from its previous guidance. It also raised its forecast for full-year sales growth to 2.0-3.75 percent, up from up 1.5-3.5 percent.
**As of Wednesday buy Next shares at 5,350p**
**As of Wednesday sell Next shares at 5,340p**

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