NEXT plc Profits Jump 12%

NEXT plc’s (LON: NXT) profits meet revised expectations following bumper Christmas.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 20 March, 2014 9:31 am GMT

| More on: NXT

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The share price of Next (LSE: NXT) added 110p to 6,695p during early trade this morning, after the clothes retailer reported a 12% increase in annual profit to £695m, which is at the high end of the range expected.

Next, which has more than 500 stores in the UK and Ireland, also unveiled 5% sales growth, with online and catalogue sales improving 12%.

The retailer added that cash flow was “strong”, noting the £461m shareholders received through share buybacks and dividends.

Next’s share price has risen 55% in the last 12 months on improving sales, with the company performing particularly well over Christmas.

Looking ahead, Next is budgeting for own-brand sales growth of between 4% and 8%, compared with a 1% to 4% estimate for last year.

The chairman, John Barton , commented:

“The year to January 2014 was a great year for NEXT. Underlying earnings per share grew by 23% to 366p and we propose to increase our full year ordinary dividends by 23% to 129p in total. This is the fifth consecutive year that our earnings per share and ordinary dividend have grown by over 15%. In addition, in February we paid a special dividend of 50p a share and have announced a further special dividend of 50p to be paid in May.”

“That performance gives us a solid platform for 2014. Our strategy remains the same, focused on our products, our profitability and returning cash to our shareholders. Notwithstanding the continued pressure on the UK consumer, we anticipate another year of growth for NEXT.”

Next’s earnings per share surpassed analyst expectations and the shares presently trade on a P/E of 18. The projected final dividend for 2014 is 155p, therefore the shares offer a prospective income of 2.3%

Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the retail sector — is solely your decision.