Can Next plc Beat Tesco PLC, ASOS plc, J Sainsbury plc And Sports Direct International Plc After Profits Fall For First Time In 8 Years?

Does Next plc (LON:NXT) (NXT.L) have more investment appeal than Tesco PLC (LON:TSCO) (TSCO.L), ASOS plc (LON:ASC) (ASC.L), J Sainsbury plc (LON:SBRY) (SBRY.L) and Sports Direct International Plc (LON:SPD) (SPD.L) after results release?

Next plc
Next plc

Next plc (LON:NXT) (NXT.L) has released 2016 results today which show a profit fall for the first time in 8 years. Sales in its Retail segment declined 2.9%, while  Directory sales were up 4.2%. This meant  Brand sales were flat against 2015’s figure, although sales of Other items meant the company’s total sales were 0.3% behind 2015’s figure at £4136.8 million.

Profitability at Next also declined, with operating profit 2.8% lower and profit before tax falling 3.8% on an underlying basis. This means earnings per share were 0.3% lower on an underlying basis, with Next’s share price up 1.3% at the time of writing.

Next expects the year ahead to be tough. However, I feel it has the right strategy through which to overcome the challenges posed by weaker consumer confidence, For instance, it will seek to develop the Next brand through improved buying and design capabilities and improved quality. It will also upgrade the Next Directory, with an improved website functionality and credit offer.

Next will also invest in its overseas operations through investment in its overseas mobile website. An investment in profitable new space is also planned, while cost control through innovation will also become more central to the company’s identity.

In the last year, Next’s share price has fallen 42%. That’s behind the performance of other retailers such as Tesco PLC (LON:TSCO) (TSCO.L), ASOS plc (LON:ASC) (ASC.L), J Sainsbury plc (LON:SBRY) (SBRY.L) and Sports Direct International Plc (LON:SPD) (SPD.L). Tesco’s shares are 4% lower, Sainsbury’s share price is 5% down, Sports Direct is 18% lower and the ASOS share price has gained 84%.

In my view, Next has investment appeal for the long run. I think it faces a difficult year, but it was able to make a good comeback from a worse position in 2008. Therefore, although I think its share price could remain volatile in 2017, I’m optimistic about its prospects in 2018.

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