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Shares in retailer Next are wearing the biggest loss on the FTSE as investors turn their nose up at its latest trading statement.

Q2 Sales growth of 2.8% YoY was slower than Q1. This was expected after Q1 strength (+6%) was flattered by an easy comparison period. And the quarter was ahead of the 2.2% FY growth guidance given in May. So far so good. Except that growth missed consensus (Retail -5.9% vs -5.3% est; Online +12.5% vs +12% est; Total +2.8% vs 2.9% est). Online beat, yes, it is growing more quickly, and it contributes more in terms of profits, but Bricks & Mortar Retail remains the dominant sales channel.

The quarter’s performance is explained almost entirely by glorious weather, which the company is certain will have brought forward many August purchases. This implies Q3 could see another sequential slowing of growth into the key Autumn/Winter season. Furthermore, weekly sales patterns have been volatile and growth distorted by end-of-season sales (a weak earlier than usual), making it difficult to identify an underlying sales trend. Not great messages, clearly preventing the company from turning more bullish for the year.

In fact, even with 4.5% growth under its belt for the first half, no upgrade to the 2.2% forecast for the year implies second half growth of precisely zero. Q3 could be critical.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Mike Van Dulken

Mike van Dulken

Accendo Markets’ Mike van Dulken has worked in the City since 2002, with some of the biggest names in the City. His career kicked off at Jefferies as an equity analyst before a 2007 move to Société Générale saw him help service hedge funds with short-term trade ideas during the financial crisis.

Head of Research at Accendo since 2010, covering shares, indices, commodities and FX, he is regularly quoted in the financial press. Accendo Markets has been voted Best CFD research Service by ADVFN in 2017 and 2018.

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