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High street stalwart Next saw its share price rise nine per cent in the wake of strong full-year results and confident pragmatism about the outcome of the current pandemic.
The retailer revealed that its full price sales for the year ending Jan 2020 had increased four per cent, and online shopping was going strong with a 12 per cent jump. Overall, its profit had increased by one per cent and its share prices now stand at 4,070p at the time of writing.
The firm issued a warning about the potential impact of the coronavirus, saying it has worked out three different scenarios for the months ahead. In the worst situation it predicts sales could be down by as much as $1 bn in the coming year, but it is confident it could sustain that loss, and it said in a statement: “We have no experience of a similar crisis so there is no way of predicting the extent that the effect coronavirus will have on our Retail and Online sales. Online sales are likely to fare better than Retail but will also suffer significant losses. People do not buy a new outfit to stay at home.”
So, in the current challenging climate, does the retailer look likely to weather the storm?
Next has been a solid performer in recent years – up until January its share price had risen 67 per cent in 12 months. This year has been a slightly different story, with stock falling 43 per cent year to date, up until yesterday’s peak, but in the wider context of the current retail climate that is not as bad as it sounds.
Market consensus on the high street brand seems to be to hold the stock, with many pointing out that the retailer’s healthy balance sheet and four per cent dividend yield suggest the shares could be a good medium to long-term investment.
The way Next’s online business is storming ahead is reassuring especially in the current situation when internet retail could be the only option. In the long-term too, though, Next has built a solid revenue stream with its online section representing 49 per cent of its total sales and 52 per cent of its profits. Its bricks and mortar stores have not fared so well though, which could be a slight cause for concern, with sales down five per cent and profit down 23 per cent.
The general sentiment, though, is that with these strong results and an earnings per share increase of almost six per cent, when the current crisis is over, could Next be one of the first retailers to fly back into fashion?
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