Since the first positive vaccine news in the second half of 2020, investors have been betting that various industries and companies will benefit from the opening up of economies. One of these segments is retail. In the US, the index has risen by 60% in the past year
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Today we introduce member Next (LON 🙂 (OTC :), one of the UK's leading retailers. The Leicester-based company focuses on clothing, shoes and household goods.
Its history dates back to 1864, when it was founded in Leeds by tailor Joseph Hepworth. The group currently has approximately 700 stores, 500 of which are in the UK and Ireland. The rest are in continental Europe, the Middle East and Asia. In addition, Next also has a significant ecommerce presence, which has contributed to monetization over the past year.
Year-to-date, shares of NXT are up 8%. In the past year they have returned about 68%. On March 25, the stock closed at 7,638p ($ 53.65 for the US stock). Market capitalization is £ 10.15 billion ($ 13.94 billion).
Recent Revenue Amid Blockades
In 2020, the total value of UK retail sales was £ 403 billion (or $ 553 billion), with 28% of sales being online. In fact, in 2020 e-commerce in the country grew by 45% year-on-year (year-on-year).
The UK began its second lockdown in early November. According to the UK Office for National Statistics:
"In January 2021, retail sales fell 8.2% compared to December 2020 as tougher national coronavirus restrictions (COVID-19) affected sales … [However,] the impact of restrictions on retail was not as significant as featured in April 2020 during the first full month of shopping restrictions. "
Next issued its most recent trade statement on January 5. Full price sales for the nine-week period ended December 26 were down 1.1% year-on-year. However, they were much better than the previous -8% guideline given in October 2020. In 2020, the group saw a 30% increase in online sales compared to 2019, while at the same time seeing a 30% decline in retail.
The retailer was able to take advantage of the holiday season in late 2020, when retail sales spiked in the weeks of December as the British government relaxed restrictions for several weeks.
Since January, the country has rolled out an extensive vaccination program. The number of UK residents who have received the first dose of vaccine is nearly 29 million (out of a population of approximately 68 million). The number of cases has also been steadily declining.
As a result, the country is likely to open non-essential retail outlets, including Next stores, on April 12. Most analysts expect businesses, including retailers, to see significant improvement as lockdowns begin to ease.
Anecdotal evidence and various statistics suggest that the British population has never had so much cash as it is today, as COVID-19 has turned Britain into a nation of savers through leave and minimal spending and spending.
Bottom Line
The following shareholders have been well rewarded in the past year. Forward P / E and P / S ratio are at 17.73 and 2.81 respectively. While this is not an overly high valuation level, most of the good news regarding the lifting of the current lockdown has already been priced into the NXT stock price. After all, the markets are always future-oriented.
Thus, profits could soon be taken on the shares. We would consider a possible drop towards 7,300p as a buy level. In the long run, we are optimistic about the company and expect the company to increase its market capitalization.
In the future, management is likely to place greater emphasis on e-commerce activities and product diversification. Its extensive range of household products could also grow significantly in the future, given the success it has seen in recent quarters.
Investors who would like to consider adding retailers to their portfolios may also consider an exchange-traded fund (ETF) such as The Amplify Online Retail ETF (NASDAQ :), the ProShares Online Retail (NYSE :), the SPDR® S&P Retail ETF (NYSE :), or the VanEck Vectors Retail ETF (NYSE :).
