Can NEXT plc Make £1 Billion Profit?

Will NEXT plc (LON: NXT) be able to drive profits higher?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to push profits up to levels not seen in the last few years.

Today I’m looking at NEXT (LSE: NXT) to ascertain if it can make £1bn in profit.

Have we been here before?

First off, it’s quite easy to see that Next has never been able to make £1bn in profit and it would appear that, based on the company’s own forecasts that it will struggle to do so in the near-term. Nevertheless, Next has been somewhat of a major success story during the past few years, as the company has outperformed the majority of its retail sectors peers despite the tough retail environment.

And it would appear that 2013 was yet another of impressive performance from Next. Specifically, Next’s management revealed at the beginning of January, that store sales had jumped around 8% between 1 November and 24 December, the key Christmas trading period — online sales expanded 21%.

Further, Next’s management revealed within the same trading statement that pre-tax profits for 2013 were going to be in the region of £700m, up 5% from 2012 figures. Next is set to report full-year 2013 numbers on the 20th of March.

But what about the future?

Sadly, despite Next’s relatively upbeat forecast for 2013, the company’s management believes that 2014 will not be such an exciting year for the company. Indeed, at the same time the retailer announced its impressive Christmas trading results, management issued a sobering outlook:

“The problem of little or no growth in real earnings looks set to persist for some time, and we cannot see any reason to expect a significant increase in total consumer spending in the year ahead.”

Unfortunately, it would appear as if City analysts agree with this view. In particular, current City forecasts predict that Next will make a pre-tax profit of £790 by 2016, growth of 13% from current levels, 6.5% per year, half of Next’s historic annual growth rate.  

Still, even though Next’s growth is set to slow over the next few years, the company’s well-timed share buyback plan is helping to push earnings per share higher, which should lead to a higher share price. Indeed, even though City forecasts only predict a 13% rise in pre-tax profit over the next two years, analysts expect earnings per share to jump 30%. 

Foolish summary

Overall, it possible that Next could hit my profit target in the long-term, although the company’s downbeat forecasts imply that the retailer will struggle over the next few years.  So, I feel that Next cannot make £1bn profit. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Rupert does not own any share mentioned within this article.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

3 UK stocks I reckon could benefit from the upcoming general election

As the general election hurtles towards us, this Fool wonders which UK stocks could benefit, and focuses on three picks…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

At 11%, this dividend share pays the biggest yield in the FTSE 100

When a dividend share offers a big yield, we need to be cautious of the risks. But I reckon this…

Read more »

British Isles on nautical map
Investing Articles

I reckon Hiscox shares could be one of the best bargains on the FTSE

I've been investing in FTSE companies for years, but after a major decline I've not seen a company with as…

Read more »

Grey Number 4 Stencil on Yellow Concrete Wall
Investing Articles

4 reasons I’d still buy National Grid shares in a heartbeat despite the recent wobble!

As National Grid shares plunged on the news of a right issue, I’m not flinching, and reckon it's a top…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

After gaining 45% in 12 months, is the Amazon share price now overvalued?

Our author thinks the Amazon share price might be too high. While the long-term future of the business looks bright,…

Read more »

Investing Articles

2 hot dividend stocks I’d buy and hold for 10 years

Our writer reckons these two dividend stocks could help her bag juicy dividends for years to come and explains why.

Read more »

British Pennies on a Pound Note
Investing Articles

2 dividend-paying penny shares I’d happily own

These two penny shares have caught our writer's eye for a combination of income prospects now and business growth potential…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

This FTSE 250 share looks like a bargain to me!

This FTSE 250 share has seen its price tumble due to chaotic local economic conditions in a key market. But…

Read more »