The performance of Next plc (LON:NXT) (NXT.L) from a business perspective has impressed me in recent months. While a number of its industry peers have experienced challenging trading conditions that have resulted in falling sales, the company has been able to deliver improved financial performance.
This is, of course, not a major surprise to me. I’ve been following the company for a significant period of time, and have seen on a number of occasions that it has been able to outperform its sector peers during challenging periods for the industry.
This was perhaps most obvious after the financial crisis. While consumer spending was coming under pressure due to sluggish wage growth and higher inflation, the company was able to generate improving EPS growth at the same time as the wider industry was struggling to do likewise.
In my view, Next has an ability to change up its strategy depending on customer tastes. For instance, it is investing heavily in its supply chain and website in order to compete effectively with its online rivals. This is helping it to grow online sales at a rapid rate, as customers expect greater flexibility from retailers. This online growth is helping to offset slowing in-store sales.
With a P/E ratio of around 11, I feel that the Next share price could offer good value for money at the moment. Sure, there are risks ahead for the UK economy, and Brexit could cause some disruption in the near term. But with what I see as a strong management team that has been able to deliver relatively impressive performance over a sustained time period, I’m upbeat about the prospects for the company.
While the stock may be seen as a surprising growth company given the prospects for the retail segment, for me it would not be a major surprise for the business to keep outperforming its industry rivals.