Thursday, 24 March 2016

Next - Full Year Results

NEXT is a FTSE 100 retail company with a market cap. of ~£10bn. It 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 70 countries outside the UK.

They have today issued full year results to 31st Jan 2016 (pdf link via Next plc). Retail stores and its online business both continued to deliver growth to lift profit before tax 5% to £821.3m , with earnings per share up 5.4% to 442.5p (2015 419.8p).

Sales are up 3% to £4.15bn .

Commenting on the results, Lord Wolfson warned:
"In many ways we have more to do than ever before with complex challenges to our working practices across product, marketing and systems", Wolfson said. "It may well feel like walking up the down escalator, with a great deal of effort required to stand still".

"The year ahead may well be the toughest we have faced since 2008.  We are very clear on our priorities going forward and whatever challenges we may face, it is important that we remain focused on ensuring that the Company's product, marketing, services and cost controls all improve in the year ahead".

They are forecasting sales growth of around 1.5% for the coming year, profits around the same as 2015 with total shareholder return of around 5% or 6% including special dividends and share buybacks.

The share price has seen some weakness since the start of the year and although the results were actually ahead of expectations, the downbeat warning has sent the share price into a tailspin - currently down ~12% to £58 at the time of posting. The shares were trading at a high of ~£80 this time last year, so a fall of over 25%!

Unfortunately, this volatility is one of the downsides of holding equities in general and individual shares in particular and the main reason I have decided to wind down my shares portfolio and focus on my investment trusts and index funds.


On a more positive note, the board have declared a final dividend of 105p making a total of 158p for the year - an increase of 5%. In addition there have been special dividends of 230p, the latest being 60p per share paid in February.

Next anticipate distributing £200m to shareholders in 2016/17  I am hoping there will be more special dividends to come over the coming year and will therefore hold the shares for the time being. They may well however elect to implement a buy-back of shares given the current price weakness. Either way, if they can return a total of £3.88 over the coming year, the forward yield is an attractive 6.7% which should provide support for the price to recover.

My sense is that the sell off has, as usual, been over-done but then what do I know - the markets are almost always efficient!

Leave a comment if you have any views on Next.

Finally, have a great Easter break - take it easy!


  1. Ciao DIY,
    At the time of writing this comment we are around 65 pounds, a massive slide given that the numbers in 2015 were not SO bad (actually I thought that they were nice...). So I agree is a "bit" oversold, but to me this is a good opportunity to add some more stocks, the company is solid after all.

    As to the point of waking up to a -15% drop I agree it's not "nice", but sometimes you also get the odd +10% rise :)

    Ciao ciao


    1. Stal,

      I agree, the pullback today provides a good opportunity to top up and if I were building my portfolio I would certainly consider adding below £60.

      The shares have had a very good run over the past few years and it is disappointing to see the shares marked down so heavily after posting solid results.

      As ever, thanks for dropping by.

  2. Ciao DIY,
    Yep got some at 56 actually... Was lucky to get the lowest point today... I still think about your ETF/FUND approach, I might add something in the future although they are products where I only managed to burn myself in the past and maybe that is why I am a bit skeptic. Let's see what happens, first Legal now Next the last month gave me plenty of a thrill :D
    Ciao ciao