Tuesday 8 October 2013

Next - New Purchase

Next (NXT) has been on my watchlist for over 2 years. Like recent acquisition Nichols, I have been patiently awaiting a pull-back in the share price.
Next 2 yr share price chart
(click to enlarge)
As can be seen from the chart, there have been very few significant share price falls so I think the time has come to bite the bullet and purchase my usual ‘half’ with a view to topping up at some future date.

The retail chain was launched in February 1982 and the first store opened with an exclusive coordinated collection of stylish clothes, shoes and accessories for women. Collections for men, children and the home quickly followed. NEXT clothes are styled by its in-house design team to offer great style, quality and value for money with a contemporary fashion edge.

Today NEXT trades from more than 500 stores in the UK and Eire and almost 200 stores in more than 30 countries overseas. Online shopping was introduced in 1999 and the entire book became available to shop from on the internet, page by page – another first in home shopping in the UK. NEXT Directory now also serves customers in around 60 countries outside the UK. The group generate around 70% of sales via stores and 30% online - by way of comparison, M&S online sales are around 7%.

NEXT has made good progress in the first half to July 2013. Sales were 2.2% ahead of last year, driven by a  combination of additional retail selling space and increased online sales through the NEXT Directory.

Financial highlights are as follows:

  •  Sales up 2.2% at £1,677m 
  •  Operating profit of £285m, up 7.2% 
  •  Profit after tax of £217m, up 13.8% 
  •  Net cash inflow of £129m before £170m of share buybacks 
  •  Earnings per share of 142p, up 19.9% 
  •  Interim dividend of 36p, up 16.1% 

The purchase price is £49.45 and I am hoping for a full year dividend of around £1.20 which would give a starting yield of 2.4%. Dividend cover is around 3x adjusted earnings.

More on this following the full year results.

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