This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Shares in retailer Next are wearing the biggest loss on the UK Index as investors turn their nose up at its latest trading statement.
Q2 Sales growth of 2.8% YoY was slower than Q1. This was expected after Q1 strength (+6%) was flattered by an easy comparison period. And the quarter was ahead of the 2.2% FY growth guidance given in May. So far so good. Except that growth missed consensus (Retail -5.9% vs -5.3% est; Online +12.5% vs +12% est; Total +2.8% vs 2.9% est). Online beat, yes, it is growing more quickly, and it contributes more in terms of profits, but Bricks & Mortar Retail remains the dominant sales channel.
The quarter’s performance is explained almost entirely by glorious weather, which the company is certain will have brought forward many August purchases. This implies Q3 could see another sequential slowing of growth into the key Autumn/Winter season. Furthermore, weekly sales patterns have been volatile and growth distorted by end-of-season sales (a weak earlier than usual), making it difficult to identify an underlying sales trend. Not great messages, clearly preventing the company from turning more bullish for the year.
In fact, even with 4.5% growth under its belt for the first half, no upgrade to the 2.2% forecast for the year implies second half growth of precisely zero. Q3 could be critical for FY guidance and investor outlook.
Mike van Dulken, Head of Research, 1 Aug 2018
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.
Prepared by Michael van Dulken, Head of ResearchComments are closed.