Investors advised to wait for stronger growth pipeline before buying Next

As Next reports Q3 results Ian Forrest, investment research analyst at The Share Centre, explains what it means for investors.

“Next reported a 5.4% rise in Q3 sales this morning, which was well below the 10% it was expecting. The clothing retailer blamed unseasonably warm weather in September and October and has now lowered its expectations for Q4 sales. Full year profit guidance has also been reduced from £775m-£815m to £750m-£790m.

“Investors in Next have done very well this year thanks to special dividends and the shares comfortably outperforming the market. The Next Directory business is still performing well and even the lowered profit guidance represents an 8-14% increase over last year.

“We continue to recommend Next as a strong ‘hold’ due to the company’s excellent track record, good management, healthy dividend and the scope for further share buybacks. However, we would prefer to see stronger growth in the pipeline before investors get on board at this price.”