Next (LON: NXT) FY16 Results: Retail Store Comparable Sales Fall 5.4%; Weak Guidance for FY17

Executive Summary

• British fashion retailer Next reported £4,097 million in group revenues in FY16, down 1.9% year over year and below the consensus estimate of £4,157 million. Retail store comparable sales declined 5.4% year over year, reflecting meaningful sales erosion.
• The retail operating profit margin contracted by 220 basis points to 14.7% year over year. FY16 Diluted EPS was 432 pence, down 2.5% year over year and below the consensus estimate of 433 pence.
• In FY17, Next expects total full price constant-currency sales growth of the Next Brand to be between (4.5)% and +1.5%. The company guides for FY17 profit before tax (PBT) in the range of £680–£780 million, equating to a fall of between 1.3% and 13.9%. FY17 EPS growth is expected to be between (12.4)% and +0.5%.