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Next share price slides despite profits improvement

Despite the prevailing doom and gloom around the retail sector, the Next share price had stood out this year with the shares hitting 12-month highs earlier this month after reporting at the start of this year, that full-price sales grew by 4.8% in the 9 weeks to the end of December.

The retailer also increased its full-year profit before tax guidance by £20m to £860m, so you would think that by beating these forecasts and reporting full-year profit before tax of £870m today, and an increase of total trading sales of 8.4% to £5.15bn the shares would be higher.

You would of course be wrong, with the shares falling sharply despite Next keeping its full-year sales guidance of -1.5% unchanged, from January along with its full profits before tax estimates of a decline of -7.6% to £795m. On the plus side, Next was more optimistic about cost price inflation which was originally expected to peak at 8% in the summer but is now expected to be lower at 7%, while in H2 inflation costs have been revised lower from 6% to 3%.

Apparently, this little morsel wasn’t enough to satisfy investors, despite the likelihood it might provide better margins over the reporting period. I guess there’s just no pleasing some people.

Next also announced a final dividend of 140p, taking the total dividend paid this year to 206p, on top of buybacks of £224m. Next said it intends to maintain its dividend in 2024 while expecting to buy back a further £220m in shares.

Next has also been busy on the acquisition front in recent months, with the acquisition of Cath Kidston in the last week or so, building on the acquisition of Joules and Made.com. 

Management expressed caution about the outlook, understandably given the changes to the corporate tax regime expected to come in next month, however, it is also worth noting they were equally cautious this time last year and still managed to raise their profits guidance as the year progressed.

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