Next’s second quarter: What the analysts say

“Our Buy rating is based on our long term view that Next will continue to be a winner in the online race, given its historic and on-going investment in home shopping, which has put it miles ahead of the competition in multichannel retail.” – Jean Roche, Panmure Gordon

“After a difficult first quarter, with the weather particularly impacting trading in March and early April, second quarter benefited from the sunshine though sales remained volatile according to management. However, while sales were in-line with expectations, profitability has been better with less stock going into the sale and lower mark-down cost.” – Kate Calvert, Cantor Fitzgerald

“Sustained hot weather has been a clear sales driver over second quarter, with strong sell through leaving around 20% less stock in the end of season sale and lifting first half gross profit around £10m ahead of expectations, a likely upgrade to full year consensus forecasts. We see a positive read through to other apparel retailers and highlight SuperGroup, benefiting from enhanced womenswear ranges.” – John Stevenson, Peel Hunt

“Ironically, in a volatile retail environment Next continues to exhibit predictable trading patterns, with an online driven growth story compensating for weak like-for-like store performance. Its full first half trading update largely mirrors its first quarter performance, though it has experienced some bounce back from the bleak weather at the start of the year.

“With a 0.9% decrease, first half retail sales are a marginal improvement on the first quarter, when Next posted a 1.9% fall, mostly attributed to the atypical weather conditions. While Next is still struggling to post positive same-space performance, there are caveats to this; firstly, its retail division actually experienced flat performance up until July 12, when the retailer went into sale through clearances and markdowns, causing a negative impact on sales values. Secondly, the retailer’s stores have played an important role in Directory growth, through order and collect services.

“Looking ahead, Next has a number of avenues for growth. Growing sales from its Direct business, is its most easy win. In terms of store space, with more than 200 international stores, across Eastern Europe, the Middle East and Far East, Next is a proven brand with international audiences, and it has scope to further leverage its franchise strategy to new geographies.” – George Scott, Conlumino

“Nexthave repeated the famous chart they published with the first quarter update to show the correlation of weekly sales with the weather. And through May, June and July, the same “up and down” pattern is as evident as it was in February, March and April, although Next refrain from talking about the heatwave. But it is hard to avoid the conclusion that the heatwave, which coincided with the start of the Summer Sale on July 13, sapped footfall on the High Street etc, as July was bad for top-line sales.

“But the Sale also had less stock in, as a result of better than expected full-price sales beforehand, although the overall sales outcome is a bit lower than expected, the gross margin was better than expected.” – Nick Bubb, independent