Next PLC (LSE:NXT)’s slightly better than expected sales numbers were a small positive but the cautious consumer outlook will provide a cap to the upbeat reaction, according to analysts at UBS.
Shares in the high street retailer rose 1.6% today after it reported quarter three full-price sales rose 0.4% and kept its full-year pre-tax profit guidance at £840mln.
The FTSE 100-listed group said full-price sales for the last five weeks - since its last trading update - were up 1.4% which the UBS analysts noted was above the company’s guidance of -2.0%.
The Swiss bank's analysts explained that the beat was primarily driven by one strong week at the end of September with +11% year-on-year growth on the back of improved sales in 'heavier weight products' given the onset of cold weather.
Online full-price sales at -1.9% for quarter three also implied better-than-expected trading in the last five weeks and was ahead of consensus for -3.5%.
The UBS analysts noted that the retailer remained cautious around quarter four trading expectations, with sales forecast to fall 2%, given sales falls of -3.7% and -1.3% in the last two weeks of October, but they left full year 2023 guidance unchanged at £840mln although EPS guidance is up around 2% at 554.5p.
The new EPS guidance is due to reinstatement of the higher tax rate which means Next no longer needs to take a charge against the deferred tax asset - having expected to do so in September - with the rate back then having being cut, the analysts explained.
The UBS analysts kept a 'neutral' rating and 6,900p price target on Next.