Back in early August, I admitted I was a fashion luddite but, even so, managed to conclude on FTSE-100 clothing retailer Next (NXT) that the weather was rather important: 'Today the old resistance has become the new support and I would snaffle them back - ceteris paribus - at about £50 but not now, even though it is promising you bank-busting rates of shareholder remuneration. You know the risks by now of course: too much sun too quick...or the return of the proper winter chill too slowly.' And a first half announcement reiterates this...
A decent 4.5% increase in sales, which is over 2% points above what was expected in May thanks to that wonderful summer - and hence people's apparent propensity to buy clothes, has though only led the company to push up its full year profit hopes by a tiny £10 million to £727 million. Still, aided by alright margins and a buyback policy, that is still equivalent to an earnings per share growth of 5%. As the company itself noted 'the UK retail market remains volatile, subject to powerful structural and cyclical changes. Many of these headwinds have not abated. As expected, sales in our stores (which now account for just under half of our turnover) continue to be challenging'. It is not easy out there...and this being admitted by a multiple decade winner such as Next tells you how it is. The share is up 8% odd when I last looked, bouncing off a level close to the 50 quid round number I mentioned above. That's still the level I would buy the shares back at.
Another large cap name I have mused upon in recent months is Imperial Brands (IMB), which also just issued an update. I know...tobacco and related shares are not everyone's cup of tea...but it is a free world and if you don't want to buy tobacco stocks, then I assume drink stocks are off the agenda too, as well as defence stocks, gambling stocks and - hell why not as they could be exploitative - banking stocks. Anyhow, Imperial Brands has perked up a bit - much to the chagrin of the do-gooders no doubt – since I last wrote about it specifically back in May.
The trading statement reiterates its profit views and makes some solid comments about its ongoing cost control initiatives and general price-mix matters. So that's good. I am all ears as it is hosting a 'next generation' tobacco product seminar i.e. all those weirdo products you see people smoking now instead of cigarettes, which is clearly an important area for future sales. I think Imperial Brands has been unfairly maligned in this space and actually does have some skills and brands and hence I reiterate my previous view that 'that the shares should be in the £30s at the very least. I remain a non-user of their products...but a buyer of their shares'.
Filed under: Next, Imperial Brands, Folli Follie, Frontera, Haydale Graphene, Widecells, Mirriad Advertising
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