Debenhams, Marks & Spencer and AB Foods have all had their share prices affected by Next’s statement today.
Shares in Next (LSE: NXT) fell 14% in the morning and blamed the expectation of the continuation of the cyclical slowdown in consumer spending on clothing and footwear.
We may see a further squeeze in general spending as inflation begins to erode real earnings growth.
As previously indicated, following the devaluation of the Pound, we expect prices on like-for-like garments to rise, but by no more than 5%. We expect that this will depress sales revenue by around 0.5%.
In these circumstances, we are budgeting for NEXT Brand full price sales growth (at constant currency) in the year to January 2018 to be between -4.5% and +1.5%. The mid-point of this range is -1.5%, which is marginally worse than the current year’s performance.
Forward guidance for sales and profits are distinctly negative.
Bottom line is that even at a yield of 3.67% and a PE ratio of 9.5 it looks likely that the entire sector is in Next’s own words in a cyclical downturn.
I’ve added Next’s news feed to my email so I can gain a better sense over the next six months just how things will turn out for this FTSE 100 stock.