High Yields & High Street Spending20 May 2014 17:20
Succinct article in Investors Chronicle:
Continually exceeds full year expectations. Retail sales grew 1.7% to £2.2bn and revenue at Next directory (online catalogue) jumped 12% to £1.3bn. Underlying pre-tax profit rose 12% to £695m with an extra £48m from online sales and £12m from new shops. International retail only makes up a fraction of business but STILL grew nicely and overseas internet business also doubled.
Next is making important structural changes , moving from a two season buying cycle to a four season, which will make matching clothes to weather much easier. It will also trial a standalone publication, "Label", devoted entirely non-competing non-Next brand, some of which are sold through Directory.
And, as promised, the cash generative retailer is paying another quarterly special dividend of 50p, rather than buying back its shares. The payout in Feb is followed with this May. Although Next says it will revert to spending surplus cash on share buy-backs if they offer a better return on equity
The outlook is bullish, too. Management now estimates 4% to 8% in growth sales for the year to January 2015 and a 5-11% increase in underlying pre-tax profit to between £730m and £770m. Broker Cantor Fitzgerald expects an adjusted EPS of 366p.
Conclusion : Managment's upeat guidance is a good sign given its history of under-promising and over-delivering. The shares have rocketed over the year, but with a total yield of 5% on offer and the promise of more buy-backs should the share price fall, it's a win-win situation for investors. Next remains a core holding.