Next´s FY13 figures content market and add pressure on M&S

Friday, 21 March 2014
ANALYSIS_ Next has reported annual profit that met the top end of its guidance, driven by growth in online and its catalogue business sales. The news were received quite positively by the market, although they meant increased pressure on rival Marks & Spencer.

Next said annual profits came in increased by 12 percent to 695 million pounds to reinforce and that "the year to January 2014 was a great year for Next," in words of its chairman, John Barton.

Meanwhile, brokers at Marks & Spencer have just cut their profit forecasts to circa 615 million pounds.

It is worth to remember that just two years ago, Next, long regarded as M&S's "little sister" as reported by 'The Guardian', overtook its rival in stock-market.

In this vein, Ohn Stevenson at Peel Hunt said that "While maintaining a cautious tone regarding economic recovery, the forward guidance from Next is significantly stronger than in recent years and leaves market expectations at the bottom end of Next's own range. Such confidence in outlook will raise pressure on competitors Marks & Spencer and Debenhams."

Next closes a strong FY13 and catches on Marks & Spencer

Next has registered an 11.8 percent rise in pre-tax profit to 695 million pounds in the year to January 2014. In January, the fashion retailer raised its annual pre-tax profit guidance to 684 - 700 million pounds, compared to 650-680 million pounds previously announced.

Good news for Next but not so good for its long-term rival Marks & Spencer, which has just seen additional pressure put on its performance given the case it wants to keep its reign in the British high street.

To this regard, analysts at Shore Capital expected Next to make a pre-tax profit of 730- 770 million pounds in 2014 while their forecast for Marks & Spencer was a lower 708 million pounds.

As in previous periods, the steady growth has much to thank to the group´s online and catalogue division sales, which rose 12.4 percent for the past twelve months. This business unit now accounts for over 35 percent of its business. Kate Calvert at Investec highlighted that "A core holding - Next's success is down to being run as a seamless multi-channel business, the pursuit of marginal gains in its offer, service and efficiency and focus on total shareholder return. However with...growth forecast to slow, we believe the valuation is up with events."

On the wake of the news, share price at Next Plc. more than doubled Thursday, surging by 55 percent to 62.80 pounds.

Next management wanted to treat the investor, as outlined by Richard Hunter, an analyst with Hargreaves Lansdown. "Double digit growth in earnings per share and another special dividend are representative of an extremely strong year... It seems that Next continues to navigate a fickle and competitive space with aplomb, even though there is the customary element of caution on immediate near term economic prospects."

Angela González Rodríguez

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