Subsequent (LSE: NXT) is a FTSE 100 inventory that I’ve been bullish on for a while. For the reason that starting of the yr, the shares have elevated by over 15% and so they’re up greater than 55% through the previous 12 months.
Final week, the retailer launched a buying and selling assertion and the market was clearly impressed by what it introduced. I’m nonetheless bullish on the FTSE 100 inventory and would purchase it proper now.
As I stated, the replace was constructive. Full-price gross sales within the 11 weeks to 17 July had been up 18.6% versus two years in the past. Like many corporations, Subsequent is evaluating its efficiency to 2019 moderately than 2020. Final yr was an odd yr as a consequence of Covid-19, so it is sensible to check buying and selling with pre-pandemic ranges.
I’m not shocked that on-line gross sales had been the driving pressure behind the rise in income. In truth, e-commerce has helped the style retailer survive the coronavirus disaster. And that is paying off once more. Robust efficiency got here from dwelling and childrenswear, in addition to its third-party LABEL operation.
Subsequent’s digital gross sales provides me some consolation. It presents the agency a long-term scalable resolution. And if we go into one other lockdown, it ought to be capable of cope.
Nevertheless it’s hasn’t been all rosy for the agency. The retail atmosphere is hard and getting individuals to pay a go to to its outlets has been an issue for Subsequent. Retail retailer gross sales are nonetheless struggling and I wouldn’t be shocked if it begins to shrink its retailer property sooner or later.
It wants to seek out methods to extend footfall at its outlets. In any other case it will turn into a price that might dampen profitability.
However simply after I query whether or not Subsequent can enhance its efficiency any additional, it goes and upgrades it steerage. It has upped its development forecast for full-price gross sales for the remainder of the yr from 3% to six%.
Not solely that, it has additionally elevated its central forecast for full-year revenue earlier than tax by £30m to £750m (pre-IFRS 16). It’s price noting right here that that is the highest finish of its earlier steerage. The retailer is clearly doing effectively, which ought to push the FTSE 100 inventory greater.
For me, the icing on the cake was Subsequent asserting that it is going to be paying shareholders a particular dividend of 110p in September. What’s extra, it expects to distribute surplus money generated as a second particular dividend on the finish of January 2022.
After all there’s no assure that it will occur. But when it does, it could be introduced early subsequent yr in its Christmas buying and selling assertion. I assume it’s completely happy days for revenue traders.
The FTSE 100 inventory isn’t low cost. It trades on a price-to-earnings (P/E) ratio of 36x. Some could also be discouraged by this costly valuation. Subsequent has seen a surge in on-line gross sales however there’s no certainty that this development will proceed. That’s particularly because it faces stiff competitors from different pureplay e-tailers.
However Subsequent continues to outperform and I reckon this will proceed. Therefore, I’d purchase the FTSE 100 inventory proper now.
Nadia Yaqub has no place in any of the shares talked about. The Motley Idiot UK owns shares of and has really helpful Subsequent. Views expressed on the businesses talked about on this article are these of the author and due to this fact might differ from the official suggestions we make in our subscription companies equivalent to Share Advisor, Hidden Winners and Professional. Right here at The Motley Idiot we consider that contemplating a various vary of insights makes us higher traders.