Next earnings preview: where is the Next share price headed?

Next shares will be in focus later this week when it releases its annual results, with investors concentrating on the outlook and hoping the retailer can bounce back as non-essential shops prepare to reopen in April.

Charts (4)

When will Next release its full year results?

Next will release its preliminary full year results at 0700 GMT on Thursday April 1. This will cover the year to the end of January 2021.

Next earnings consensus: what to expect

Next has not been immune to the challenges that the pandemic has created for the retail sector but it has proven to be more resilient than many of its high street neighbours. This is partly because of its strong digital offering, with online sales almost completely offsetting the sales lost from closed stores during the nine weeks to December 26.

Although Next has upped its digital game over the past year it has not been enough to offset the severe disruption caused by the pandemic and lockdown rules, and revenue and profits this year will both be significantly lower as a result.

Next’s last update in January means it has already provided sales figures for 48 of the 53 weeks of the year. It also provided profit guidance at that point, meaning figures should be very close to expectations.

Next’s guidance is for full price sales to be down 16% year-on-year and for reported pretax profit of £342 million. It should end the financial year with net debt of around £625 million after being slashed by £487 million.

While there is limited scope for Next to surprise the market, analysts are expecting Next to beat its profit guidance. Consensus estimates compiled by Reuters forecast Next will deliver a pretax profit of £352.7 million. Still, that will be down from £748.5 million the year before. Revenue is expected to decline to £3.65 billion from £4.36 billion.

What is the outlook for Next as lockdown eases?

With Next having outlined what to expect from the year just gone, the primary focus will be on what’s in store over the coming year. The government has outlined its roadmap out of lockdown and has signalled that non-essential retailers like Next will be able to reopen on April 12 at the earliest.

Next outlined various scenarios in January that would lead to pretax profit ranging between £600 million and £735 million in the current financial year to the end of January 2022. Its central scenario assumed stores would be able to reopen at the start of April and deliver a profit of £670 million and that full price sales would be flat from the 2019/20 financial year before the pandemic hit. Investors will be expecting an update to reflect the government’s reopening date.

Investors should also look for news on the delay in delivery of stock after Next said the pandemic was causing a two to three-week delay in receiving new stock from the Far East, which caused inventory levels to drop 10% in January 2021 from the year before. Next said it expected the problems to smooth out by the end of March and investors will want confirmation that its supply chain is operating as normal.

What about the Next dividend?

The other key area to look out is dividends. Next suspended dividends and share buybacks in April 2020, soon after the pandemic erupted. Next and other retailers may have a date to work with but are uncertain about how quickly sales and traffic will rebound as rules are relaxed. This makes the reinstatement of dividends this week unlikely, although not impossible.

What is more likely is commentary on when dividends will return and at what sort of level. Next said last year that it was committed to reinstating payouts once the crisis had passed and that it didn’t expect any long-term change to the dividend policy it had before the pandemic.

Where is the Next share price headed?

The Next share price has been trending firmly higher from its mid March 2020 lows. The share price reached an all time high of 8180 in January before slipping lower to around 7300 (its pre-pandemic high). 

Next trades above its year old ascending trendline and above its 20 & 50 sma on the daily chart; a bullish bias. The RSI is also indicating that there is more upside to be had.   

However, the recent price action remains fairly rangebound capped on the upper band by 8180 and on the lower band by 7380. A post results break out trade could see Next bound to a fresh all time high beyond 8180 towards 8500 on upbeat results.  

On the other hand, disappointing figures could see Next share price drop below the ascending trendline and breaking out of 7380 lower band of the holding pattern towards horizontal support at 6900. 

How to trade Next shares

You can trade Next shares with City Index using spread-bets or CFDs, with spreads from 0.1%.

Follow these easy steps to start trading Next shares today.

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘Next’ or its ticker ‘NXT’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade 

Build your confidence risk free

More from Equities

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.