Next plc Ordinary 10p Shares (NXT)

Company overview

Next PLC is primarily a mid-market clothing retailer which has in recent years diversified into home furnishings and home shopping facilities via Next Directory. Although its major interests are in the UK and Ireland, it also has a presence in Europe, North America, the Middle East and Asia.

HL Comment (26 March 2009)

While the group can trace its origins back to 1864, the first women’s Next clothing store was opened back in February 1982. Today Next operates from over 450 stores across the UK and Ireland, with over 140 stores located overseas. Having almost disappeared into administration back in the late 1980s, Next now competes with the likes of Marks & Spencer in the huge mid market clothing sales arena.

The group’s recent full year results (26Mar09) proved to be generally in line with analysts’ forecasts. Overall group revenues declined by 1.7pc to £3.27 billion, whilst pre-tax profit retreated by 13.9pc to £428.8m. Like-for-like sales at the group’s core UK retail division fell by 6.1pc, while sales at the group’s catalogue Directory business again proved relatively resilient, improving by 2.1pc overall. Furthermore, allowing for continued cost cutting and management’s reduced stock buying programme, earnings per share continued to outperform the decline in profits, retreating by 7.5pc. Finally, management caution for the outlook was reflected in the company’s decision to maintain the dividend pay out at 2007 levels.

Acting for negative investor considerations, like-for-like sales at the store division remain in retreat, whilst management outlook comments continue to express caution. In addition, the weakness in the pound is expected to continue pressuring profit margins, with many of the company’s products sourced from overseas. On the positive front, Next Directory is still experiencing sales growth, whilst general management caution continues to leave stocks relatively low. In addition, a tight rein on costs is being maintained, whilst the management team remains highly regarded.

On balance, current market consensus opinion denotes a cautiously positive investment stance.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
24-01-2009	3,271.50	428.80	156.00	7.00	n/a	(8.00)	55.00	5.00
26-01-2008	3,329.10	498.10	168.70	8.20	0.50	16.00	55.00	4.00
27-01-2007	3,283.80	478.40	146.10	13.30	0.90	15.00	49.00	2.50
28-01-2006	3,106.20	449.10	127.40	13.30	2.20	6.00	44.00	2.60
29-01-2005	2,858.50	424.30	120.20	13.20	n/a	n/a	41.00	2.60