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Don’t panic about the share price falling on the back of half year results

NEXT (NXT) £58.26

Gain to date: 39%

Original entry point: Buy at £41.91, 20 December 2018

Shares in high street bellwether Next (NXT) have eased back on profit-taking following first half results (19 Sep), with the absence of further earnings upgrades and a cautious outlook statement weighing on the stock.

Yet we’re sitting on a near-40% gain since saying to buy the shares last December.

Results for the six months ending 31 July 2019 showed 12.6% growth in online sales, while retail sales declined by 5.5%. Pre-tax profit nudged 2.7% higher to £320m and Next maintained full year guidance for pre-tax profit to be up 0.3% at ‘around £725m’ with earnings per share growth of 5.2%.

Chief executive officer Simon Wolfson highlighted a weak start to the autumn season due to warm September weather and the expectation is the fourth quarter will be better than the third quarter.

Next isn’t panicking over Brexit, saying it will ‘only materially affect consumer spending in the event that it triggers inflationary pressure on prices or logistical problems at our ports’.

SHARES SAYS: Next’s shares have had a stellar run year-to-date, but we are sticking with the high-quality, cash-generative shopkeeper as one of our key picks in the structurally challenged retail sector.

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