Next Plc – Gathering Clouds

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Next Plc – Gathering Clouds
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  • NEXT plc (LON:NXT) has issued a trading statement for their third quarter, ending 30 October.

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Q3 2021 hedge fund letters, conferences and more

  • The group said sales had continued to run ahead of expectations but that emerging cost pressures and challenges with stock availability would hold profit growth back.
  • Online, the group saw sales rise by 40% compared to pre-pandemic levels, offsetting a 6% decline in-store. Overall sales in the period were 14% ahead of pre-pandemic levels.
  • The group expects sales growth to moderate in the final three months of the financial year, and sees a headwind to sales growth coming from growing pressure on consumers’ disposable incomes. Guidance of Q4 sales growth of 10% and full year profits of £800m is left unchanged.
  • The shares reacted with a drop of 3% on the news.

NEXT's Performance Will Be Affected By Delays And Higher Costs

Commenting on the numbers, Steve Clayton, fund manager at HL Select said:

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“NEXT have delivered a stellar sales and profit performance in recent quarters, but the going is getting tougher. The company will not be alone in facing delays and higher costs in sourcing and distributing stock. Nor will they be the only one whose customers face a squeeze on their spending money, when the gas bill turns up. All the evidence so far is that NEXT will handle these issues better than most. But profits are still likely to be impacted. So far the company are saying that higher costs are absorbing the benefit of stronger than expected demand. But with demand set to come under increasing pressure as consumers struggle with higher bills, the outlook is becoming less certain.

NEXT are the best managed retailer we know of, both on the UK High Street and Online. Indeed they are a mainly digital business these days. But even the best can be challenged. Trading performance for the next few quarters will be impacted by how well the company can restock its warehouses and stores and at what cost. On top of that hangs the question mark over consumers spending power.  The recent easing of gas prices offers a glimmer of hope here. There are near term challenges, but NEXT starts from a position of strength. The company’s comments about investing further into digital marketing, even as clouds gather, gives a clear message. Whatever happens in the months ahead, NEXT intends to emerge from the clouds with an even stronger position online.”


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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