Next shares have fallen 28.6% year-to-date to 5,814p, which might prompt investors to ask if now is a good time to buy the dip on the FTSE 100 stock.
Next is a consumer-focused group, placing the blue chip retail company squarely in the line of fire as UK customers trim the fat (and the fashion) off their budgets in anticipation of soaring energy and food prices.
While inflation currently stands at 10.1% and is expected to hit 13% this October according to the Bank of England’s latest estimates, if you are not afraid to hold a stock over the long term, Next shares could be one to consider.
Next shares
Next shares look set for increased earnings, despite the soaring rate of inflation, with a PE ratio of 11 and a forward PE ratio of 10.4.
The company also has a pretty good dividend yield of 2.2%, and a remarkably encouraging dividend cover of 4.2, assuring shareholders of dividend payouts and value return even if Next suffers a couple of blows in the volatile market environment.
Next Financials
Next reported a strong Q2 trading statement in August 2022, increasing its FY profit guidance by £10 million to £860 million, representing a 4.5% growth year-on-year.
The company’s retail segment climbed in sales past pre-Covid levels in 2019, with a Q2 performance 4.7% ahead of its results three years ago.
Next warned it did not expect to outperform expectations again in HY2 2022, due to inflation concerns as the cost of living crisis deepens.
However, the fashion group reiterated strong guidance for FY 2022-2023 despite wider inflationary concerns.
Next reported a central guidance of a 1% rise in HY2 full price sales, alongside an EPS growth of 7.2% to 568.1p compared to FY 2021-2022.
Next Dividends
The retailer reintroduced dividends after suspending payments over the Covid pandemic, and returned value to shareholders via two special dividends in 2022 of 110p and 160p per share in 2022.
Next also distributed an ordinary dividend of 127p per share on 1 August 2022, and confirmed a return to its regular dividend cycle this year.
Next shares further benefited from £224 million spent by the firm on share buybacks over 2022, with 3.5 million shares repurchased at an average price of £63.85 per share.
If profits are in line with management guidance, the Equivalent Rate of Return (ERR) on the buybacks will be 10.6%.
Next seems to be in good hands heading into the autumn and winter seasons, and appears fairly confident it will weather the market storm without too huge a battering in the coming year.