Next (LSE: NXT) has long been held up as a prime example of how to run a retail business. Its shares hit an all-time high of over £50 this morning, as it posted yet another set of impressive trading figures.
Total sales were up 2.3% for the last six months, with the Directory business again leading the way with growth of 8.3%. These figures also included Next’s end-of-season sale, which the company entered with 20% less stock than last year, and consequently saw lower markdowns.
A surge of spontaneity
However, Next did warn that consumer spending patterns were getting harder to read, with a lot more volatility its weekly sales numbers. Next puts this down to consumers becoming more sensitive to short-term events “such as a change in the weather, the timing of Bank Holidays, school holidays, etc”.
Next doesn’t think the overall amount of consumer spending is affected by this trend, but it did highlight the danger of extrapolating trends from short periods of sales data — something we would definitely echo here at The Motley Fool.
The retailer is expecting the second half of its financial year to broadly match the first, and is now predicting an overall sales increase of between 1.5% and 3.5%. However, it is raising its full-year profits guidance to between £635m and £675m, which should translate into earnings per share growth in the range of 8% to 15%.
As ever, share buybacks feature heavily in Next’s plans, and it is anticipating spending between £250m and £350m this year.
At the time of writing, Next shares were 2% higher at 5,010p, having reached 5,080p earlier in the day. This values the company at £8bn and gives it a forward P/E multiple of around 15 times.
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> Stuart does not own any share mentioned in this article.