Next Q1 earnings preview: Where are Next shares headed?
Joshua Warner May 4, 2021 10:14 PM
Next shares will come into focus when it releases its first-quarter update later this week, with investors hoping the retailer has seen an encouraging number of customers return to its stores since they were reopened and that the strong growth in online sales has continued.
When will Next release its Q1 results?
Next will release its first-quarter results on Thursday May 6.
What to expect from Next’s Q1 results
Next has been one of the most resilient retailers during the pandemic, as years of investment into its online operations paid off and allowed it to capitalise on the shift to online shopping and cushion the £500 million in lost sales from having its stores closed during lockdown.
Online sales already accounted for around half of total sales before the pandemic erupted and the extraordinary growth seen since meant total sales were down just 15% in the last financial year to the end of January 2021. Additional costs meant the impact of the coronavirus on earnings was more extreme, with pretax profit more than halving to £342.0 million from £728.5 million the year before.
However, with online sales growth showing no signs of slowing down and its retail stores having reopened across the UK last month, Next is expecting sales to return to pre-pandemic levels in the current financial year and for pretax profit to come in between £670 million to £700 million – only 4% shy of what it delivered two years ago.
Investors will want to see evidence that customers have eagerly returned to stores since the doors were reopened but that its online offering has sustained the momentum built up over the past year. Next already bumped up its profit guidance for this year by £30 million after online sales in the first eight weeks of the new financial year were ahead of expectations and up over 60% compared to two years ago, and numerous other UK retailers have seen encouraging numbers of customers flock back to their shops in recent weeks – both of which bode well for Next.
Keep an eye on the outlook. The guidance provided by Next for this year provides a tight range. Its downside scenario sees a 3% fall in full price sales and pretax profit of £645 million this year while the upside would see a 3% rise in sales and profit of £745 million.
There could also be commentary on when shareholders could see dividends and buybacks reinstated. With stores having only just reopened and the outlook still highly uncertain, Next is likely to play it safe when it releases its first-quarter results and wait until later this year, possibly at its interim results, to provide a solid timeframe. It is prioritising reducing debt at the moment but has said it would have enough headroom to remain comfortable if it does decide to restart payouts later this year.
Where next for the Next share price?
Next has trended higher across the pandemic from the mid-March low hitting resistance at 8370 the all time high.
The move higher has lost momentum over the past few weeks and is currently testing the ascending trendline whilst also trading on its 20 & 50 EMA. Next is trading with a more neutral bias as investors await results later this week.
The price has been capped on the lower side by 7750 in recent weeks. So, sellers could look for a break down below 7750 for a deeper selloff towards 7300.
On the other hand, buyers could look for a firm move back over the ascending trendline, the 50 EMA and 8370 for a post earnings break out trade towards 8500 round number.
How to trade Next shares
You can trade Next shares with City Index by following these four easy steps:
- Open a City Index account, or log-in if you’re already a customer.
- Search for ‘Next’ in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.