Can the Next PLC share price recovery continue after Thursday’s FY results?

[MongiIG]

With the UK economy leaving the pandemic behind, inflation hitting another 30-year high, and ongoing supply bottlenecks, can the Next share price recover further?

Source: Bloomberg

 Axel Rudolph | Market Analyst, London | Publication date: Wednesday 23 March 2022 

Next, a bellwether for the UK clothing retail sector, is set to release its full-year (FY) preliminary results on Thursday, with the company having raised its FY guidance in January.

Profit before tax guidance was upped by £22 million to £822mln for the year ending in January, with the clothing retailer pointing out in its statement that economic uncertainties would muddy its forecast for the upcoming year. That was before Russia invaded Ukraine, triggering a surge in oil, gas, and commodity prices.

Added to that today’s UK inflation, which hit another 30-year high at 6.2% with the largest upward contributions coming from housing, household services and transport, and the fundamental outlook for the FTSE 100-listed company may remain unclear, whatever its full-year results will be.

Next said forecasting sales for 2022 may turn out to be difficult, since the possibility that “the result of pent-up demand combined with spending over savings” during the pandemic, may reverse.

Renewed leisure and travel spending following the easing of Covid restrictions in the UK may also depress demand for discretionary goods, Next’s CEO Simon Wolfson suggested, while inflation of essential goods and clothing could force consumers to think twice about what they spend their money on.

The board also highlighted the impact higher taxation and interest rate hikes, with the Bank of England (BoE) already making three since the beginning of the year, may have on its revenues.

Source: ProRealTime

 

Next’s shares fell by over 30% from their £82.34 high to their early March low at £55.76, close to major support at £55.21 to £53.60 which encompasses the June 2020 high, August and November 2020 lows.

A rise back above the 200-week simple moving average (SMA) at £61.06 has since taken the Next share price back up towards its 2022 downtrend line at £65.72, below which it consolidates ahead of Thursday’s full-year earnings.

Were the downtrend to be breached, the 55-day SMA, July 2021 and early February 2022 lows and early March high at £69.85 to £72.07 would be targeted but could prove difficult to overcome.

Source: ProRealTime

 

A slip below this week’s low at £63.60 could lead to the mid-March low at £61.09 being revisited with a drop to the next lower £55.76 early March low looking improbable at the moment.