Thursday preview: Next unveils full year results

Fashion retailer Next expects to report an increase in full year pre-tax profit on Thursday.

In a pre-close statement in January, the company guided towards annual pre-tax profit between £810m to £824m, marking a 3.6-5.4% rise on the previous year’s £782m.

At the time, the company said full price sales for the year to date were 3.7% ahead of the prior year, just below the bottom end of the previous guidance for 4% to 6% growth.

“However, good control of margins, costs and stock, along with healthy clearance rates means that we expect profits for the full year to remain within our profit guidance of £810m to £845m, issued in October,” the group said in a statement.

Next also highlighted that the fourth quarter had been disappointing due to unseasonably warm weather in November and December and that January's performance would determine the final outcome.

Deutsche Bank has pencilled in pre-tax profit of £816, on revenue of £4.17bn compared to £4.02bn in 2015.

The bank said the focus is likely to be on guidance for the new financial year.

“This guidance currently stands as an expectation of i) 1-6% sales growth, ii) profits to grow in line with sales, iii) surplus cash flow from operations of £370m,” said DB analyst Charlie Muir-Sands.

“This in turn implies i) PBT range of £818-873m - our forecast of £856m is £10m above the mid-point, ii) potential for 245p per share of special dividends or 3.7% buyback.”

Investors are also likely to pay close attention to the company’s balance sheet leverage and capital returns after buying back £150m of 2.2m shares before the end of the financial year, DB added.

The bank expects that this means there will be just £220m remaining capital returns for the year (£370m less £150m).

“However, if Next replaces its £213m bond due to be redeemed in October then we see scope for an additional £400m capital returns accretion.”

Thursday 24 March

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