On the plus side, Wells appreciates that Next is “straight and honest with shareholders,” providing illustrations of various weak like-for-like scenarios. “That’s the sort of detail that no other retailer gives you,” he said.
However, there is no getting around the fact that the business is on the mature-side and facing much stronger competition in the online space.
And the “enticing 8% to 9% dividend yield,” while not necessarily a value trap “might not signal great times ahead either,” Wells said.
The real question is whether Next’s stock has reached the low point in its valuation and is going to recover.
“Next won’t suddenly run off and go back to where they’ve come from. There’s a risk that retailers still have to further to fall before we reach a bottom.”
The triggering of Article 50 at the end of March and the initiation of Brexit negotiations are going to make an already challenging time for UK retailers even more difficult, he added.
