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Subsequent (LSE:NXT) has a wealthy historical past of outperforming the broader retail market, which explains its 18% share worth rise in 2025.
That is greater than the broader FTSE 100‘s 12% increase since January 1. And it’s all of the extra outstanding given the gloomy outlook for Britain’s retail sector
Nonetheless, Subsequent’s gravity-defying act is exhibiting indicators of fatigue, and its shares dropped sharply on Thursday (18 September) after it warned issues may get harder.
I’m questioning if this pullback to five-month lows marks a sexy dip-buying alternative.
Gross sales rise
Subsequent’s warning got here because it introduced first-half financials that matched forecasts. Full-price gross sales rose 10.9% within the six months to July, which drove pre-tax earnings 13.8% greater.
That’s a reasonably respectable end result, given the troubles in UK retail that I alluded to earlier. Subsequent sources round four-fifths of gross sales from its residence market.
However these sturdy gross sales must be seen within the context of one-off components, too. The large cyber assault on Marks & Spencer‘s operations gave the company’s gross sales a lift, as did seasonally right hotter climate through the half.
Cooldown anticipated
With these things now not offering help, the Footsie retailer’s predicting a pointy slowdown because the “anaemic” UK economic system bites.
Full-price UK gross sales are tipped to develop simply 1.9% within the second half. That’s down sharply from 7.6% within the first half.
As a consequence, full-price gross sales progress at group stage’s anticipated to decelerate to 4.5% from 10.9%. Progress over the total monetary 12 months (to January 2026) is anticipated at 7.5%.
Too bearish?
This may not come as too alarming for long-term traders. The issue, nonetheless, is that Subsequent has additionally mentioned “the medium to long-term outlook for the UK economy does not look favourable,” citing:
- “declining job opportunities,”
- “new regulation that erodes competitiveness,”
- “government spending commitments that are beyond its means,” and
- “a rising tax burden that undermines national productivity.”
Subsequent — whose chief government Lord Wolfson can be shadow Legal professional Normal — is probably proper to be cautious given current financial knowledge. The query is whether or not the corporate is simply too pessimistic concerning the dangers it faces, and whether or not traders have overreacted to its warnings on future gross sales.
Garry White, analyst at Charles Stanley, reminds us that steering from the FTSE agency “is typically conservative, with the company known for under-promising and overdelivering on its financial results.”
Subsequent’s raised its personal estimates a number of occasions in 2025 alone, sustaining its lengthy report of upward revisions.
Right here’s what I’m doing now
Having mentioned that, I’m not tempted so as to add Subsequent shares to my very own portfolio following this week’s fall. The dangers are important as rising inflation and weak financial progress put strain on shopper spending. The retailer additionally faces intense competitors and quickly rising prices.
To my thoughts, this outweighs the distinctive progress it’s making on-line and the energy of its manufacturers.
At present Subsequent trades on a price-to-earnings (P/E) ratio of 16.8 occasions. That is too excessive for my liking, and leaves the share worth susceptible to additional weak point, in my opinion.
