By Graeme Evans
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A warning by Next on the “anaemic” UK economy and another profit downgrade by Pets at Home today sent a chill through stocks in the FTSE 100 retail sector.
Next shares fell 5% or 545p to 11,455p, despite the chain’s latest strong results and message that positives for the group “materially outweigh” the negatives.
It added: “In spite of the challenges presented by the UK economy, Next is in a good place, with multiple opportunities for growth, both in the UK and overseas.”
Next half-year profits rose 13.8% to £515 million, while group sales lifted 10.3% after benefiting from warm weather and the cyber attack that crippled rival M&S.
The shares are still 18% higher year-to-date, reflecting a series of upgrades to guidance following strong international growth and continued UK expansion.
UBS, which today lifted its price target to 14,500p, said: “Next’s half-year results highlighted that it is in rude health as it laid out the growth opportunities it is pursuing with vigour.”
Alongside Next at the bottom of the FTSE 100, Marks & Spencer gave up some of this week’s gains with a fall of 2% or 7p to 350.8p and JD Sports Fashion eased 2.3p to 90p.
In the grocery sector, Tesco dropped 7.7p to 432p and Sainsbury’s fell 6.8p to 317p.
The mood wasn’t helped by the latest profit warning of Pets at Home, which downgraded guidance for the second time since late July.
Amid continued tough conditions in the pet retail market, the group now sees full-year underlying profits in the range of £90-100 million.
It recorded a profit of £133 million in May’s annual results, when it steered the City to £115- £125 million for this year.
Store sales in particular have been “challenging”, falling by 5% in the year to date. However online sales have seen double digit growth.
Alongside the warning, the group said chief executive Lyssa McGowan had left “with immediate effect” with no successor lined up. The shares fell 16% or 35.6p to 192.8p, leaving them 36% lower in the past year.
Elsewhere in the FTSE 250 index, Jupiter Fund Management shares jumped 13% or 15.8p to 140.8p after Peel Hunt highlighted a “bumper” 10% dividend yield and forecast attractive earnings growth in the coming years.
The broker backed the stock with a new target of 156p, up from 90p previously.
Precision technology firm Renishaw also rallied 7%, continuing its recent strong run with a rise of 225p to 3420p after annual profits lifted 3.8% to the top end of August’s guidance at £127.2 million.
Amid calm market conditions following last night’s Federal Reserve interest rate cut, the FTSE 250 index rose 51.64 points to 21,671.45 and the FTSE 100 index improved 30.85 points to 9239.23.
