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The Expert View: Tesco, Schroders and Next

by Chris Marshall on Jan 06, 2014 at 05:01

Next wins over City with bumper Christmas

Next (NXT.L) won a pair of new ‘buy’ ratings on Friday after the high street clothing retailer reported bumper Christmas sales and a special dividend.

Both Nomura and Cantor Fitzgerald upgraded Next shares to ‘buy’ after the group reported an 11.9% rise in Christmas sales, upped its profit forecast and announced a special dividend of 50p per share.

‘The stock, in our view, is well supported by its superior returns, prospects and the strength of its on-line business when one considers the valuation the market puts on pure play retailers’, commented Cantor analyst Freddie George.

Nomura’s Frazer Ramzan said this: ‘In our view, Next’s strong delivery stems from its high hurdle rate (2 year cash payback, 15% net branch contribution), sensible planning assumptions and cost discipline, which have led it to its favoured position of 37% online sales participation and marketing leverage through its directory and credit offer. This combination is likely to continue to deliver.’

Both analysts expect the shares to rise to £65.00. The shares shot up 10% on Friday to £60.85.

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