Analysts maintained their lukewarm stance on Next PLC (LSE:NXT) shares following the retailer’s profit warning earlier today.
According to broker Shore Capital, the physical and online presence of the FTSE 100 group better positions it compared to pure online players such as Boohoo.
Next issued a profit warning alongside its half-year results this morning, as cost-of-living pressures begin to impact on the retail giant.
The company cut its profit guidance but still expects to make a full-year profit before tax of £840mln, compared to the £860mln it predicted in an August trading update
Full price sales are expected to be 1.5% lower in the second half of the year, with boss Lord Wolfson lamenting the cost-of-living crisis which resulted in last month's sales being lower than expected.
Profit headwinds, in particular the cost-of-living crisis and the uncertainty that brings, were behind the downgrade, but Shore Cap analyst Eleonora Dani said it was still a solid set of results and that Next "remains a well-managed company with tight cost and stock control, a clear well-executed strategy and an experienced management team".
However she reiterated a 'hold' rating as the shares "are fairly valued".
Elsewhere, UBS noted that Next increased prices in its autumn/winter range to mitigate cost inflation in the second half of next year, passing costs on to consumers.
Analysts noted that Next had pointed to "some mitigation" for the cost price inflation led by the pound's devaluation, "such as easing capacity constraints, producer nations’ currency devaluation, likely lower shipping/commodity costs as well as new sources of supply".
Furthermore, while overseas margins fell due to higher freight costs alongside greater returns, Next is looking to recover some of the losses in the second half of the year.
UBS also said the new 2023 profit guidance is broadly in-line with where the City analyst consensus had moved ahead of the results, and the shares have "already sharply de-rated".
The Swiss bank kept its 'neutral' rating, though its 6,900p price target offered some upside after the shares fell almost 10% to 4,801p after the results.