Broker snap: Good time to accumulate Next

4th Aug 2010 11:29

Fashion retailer Next spent most of the morning at the bottom of the FTSE 100 league table after a disappointing trading update, and this could present a buying opportunity, Charles Stanley states. "Given our expectation that the group will deliver at least high single-digit EPS growth in each of the next three years, we consider the valuation very attractive and re-iterate our Accumulate recommendation," said Charles Stanley analyst Sam Hart, after the shares were hammered on the back of cautious comments on the outlook.The broker is leaving its 2011 profit before tax and earnings per share estimates unchanged at £555m and 214p respectively, and is also standing pat on its 2012 estmates (£590m and 235p respectively)."The consumer environment is expected to remain subdued going forward, reflecting proposed government spending cuts and tax increases. Demand, however, should remain relatively resilient, given that we believe unemployment is very close to its peak (or may even have already peaked) and anticipate only very modest interest rate increases in 2011. In such an environment, we expect Next to continue to make good progress," Hart said. "Action is being taken to improve the fashion content of ranges, attract more younger customers, further expand in Homewares and grow International. Directory is particularly well placed to benefit from structural growth in online retailing, given years of experience in home shopping and established infrastructure," in Hart's view.