Shares in the UK clothing retailer Next are close to an all-time high, thanks to a strategy that has seen the company sail through Covid-19 headwinds.
With the start of the first lockdown last March, Next feared shuttering its high street stores would have a disastrous impact on finances. But sales have held up better than anticipated, bolstered by demand for home furnishings, loungewear and children’s clothing.
The stock has been given an extra boost by a retreat from speculators who have been betting against it, with one analyst saying short sellers have “thrown in the towel”.
The Next share price rose as high as £79.34 on Wednesday, close to the record of £80.15 reached in December and August 2015. The shares have more than doubled since they fell to a low of £36.62 in March, and have gained nearly 15% over the past year.
Next has emerged as one of the winners from a tough Christmas period thanks to strong online sales. In the nine weeks to 26 December, sales were 1.1% lower than a year earlier, a much better performance than the 8% decline the company had forecasted in the autumn. While takings at its physical stores decreased 43%, online sales were up 36%.
Simon Wolfson, its chief executive, has said the £28m of extra profit from better-than-expected sales in November and December will be all but wiped out by the impact of shutdowns during the Boxing Day sales as well as new lockdowns in England and Scotland in the new yearthat have forced non-essential retailers to close again, including Next’s 500-store chain.
However, even if stores remain closed through February and March, Next is forecasting profits of £670m for the coming year. The figure would be within 10% of pre-pandemic levels.
Neil Wilson, chief market analyst at the trading platform Markets.com, said Next could seemingly “do no wrong”, adding: “Wolfson is clearly the best retailer out there.”
Wilson said Next, together with web-only retailers such as Asos, have clearly emerged as “online winners”, noting that short sellers have “thrown in the towel in the last couple of months which has been helping drive the stock higher.”
Asos reported strong sales on Wednesday, driven by beauty products and leisure wear. Wilson said investors were drawn to companies that generated lots of cash, like Next, in the hope of big dividend payments.
He added: “Crucially, while you could see the growth in online-only retailers ebb this year, if you think of those companies that can keep the foot to the pedal and accelerate growth rates as the reopening occurs this year, then Next is exceptionally well placed to benefit from that too. A foot in both online and bricks-and-mortar camps is looking like a solid foundation for continued growth.”