Next Earnings Outlook

Next are set to report their first quarter earnings before the UK market opens on Wednesday 2 May 2012, with many spread bettors and CFD traders – who have bought into the long standing Next share price rally – reflecting upon the numbers presented and asking themselves, ‘Can the success story continue?’ 

Next’s shares have immensely outperformed the FTSE 350 retail sector and indeed the FTSE 100 over the past three years. Since the March 2009 bottom was reached for most global equity markets, Next shares have rallied a hugely impressive 183% to its April highs, compared to the FTSE 100, which has rallied 70% and the FTSE 350 retail sector, which has rallied 84% in the same time period. 

The question now is can the success story continue? As one might expect given the sharp share price rise in recent years, Next has been trying to dampen expectations somewhat given the significant headwinds facing UK consumers as data from the Office of National Statistics showed that the UK economy entered into a double dip recession on 25 April 2012.

In late March, Next’s CEO Simon Wolfson, said the retailer was being cautious in terms of budgeting for the 2012-13 financial year amidst a ‘very uncertain’ economic outlook typified by the eurozone debt crisis, a credit squeeze and high unemployment.

Is ASOS a shot across Next’s bow?

ASOS, the internet fashion retailer, saw its own shares slump as much as 12% in one trading session last week after badly disappointing the markets by reporting that UK sales growth in the last quarter slowed by more than half the rate of growth in the previous quarter, with sales rising only 4%.

The retailers CEO marked the slowdown in pace as not attributable to site traffic but rather an unwillingness of UK consumers to put their hands in their pockets. Much of the delight concerning Next is their ability to attract low to middle income shoppers still looking to shop for bargains, and their ability to attract footfall both to stores and online.

The sentiment from ASOS, which echoes broader concerns within the retail sector, is therefore somewhat of a shot across the bow for Next shareholders ahead of their Q1 on Wednesday and it will be interesting whether Next sees a similar slowdown in spending.

Indeed, with Simon Wolfson himself confirming in March that the retailer had already started to see negative impacts on consumer behaviour, there is every chance that Next could tow a similar theme to ASOS.

That said, given the star performance of Next in the last three years, it would be a brave choice to bet against the company and so risk management could be key for traders looking to take advantage of any volatility around the release of their quarterly figures.

Technical Analysis Report on Next 

By Sandy Jadeja, Chief Technical Analyst 

“With the UK Stock market up +2.9% on the year some stocks have tagged the rally and enjoyed gains along the way.

One stock which is a UK High Street favorite has also seen positive gains for 2012. On a longer term basis Next has achieved a parabolic rise from the November 2008 lows after completing a Double Bottom pattern.

Although during 2010, Next spent much of the time consolidating between £1.80 – £2.38 the stock finally broke above £2.38 to continue higher in line with the dominant bullish trend.

Currently Next shares display a series of Higher Highs and Higher Lows which clearly indicates the trend remains bullish. On a Daily Chart the stock appears to be in a consolidation phase and will need to stay firmly above £2.88 for now.

The 52 week high of £3.07 remains a short term resistance level of which a clearance above this level could pave the way to new highs for 2012 towards £3.12 – £3.33 as a price objective.

Analysts will note that the share price is above the popular 50 period Moving Average which is a Technical Indicator used by Market Technicians and Traders to determine the near-term trend. If NEXT Shares dip over the coming weeks, support levels reside at £2.88 – £2.75 which may provide a buying opportunity.

The old adage of “Sell in May and go away” may affect the overall markets and offer resistance for the Bulls but as long as the trend remains bullish the price of Next shares could enjoy further gains.”