Next to go?

2 mins. to read

Generally electrical retailers and clothes retailing are very separate and dsitinct businesses. Comet has gone under this week and today is a sad day when it is expected that many of the shops will be closed and the staff made redundant – hardly an enjoyable Xmas looming for many of these… It has been a particularly tough time for electrical retailers of late. People increasingly shop for these products online and are less likely to feel the need to see the goods in store- hence internet based shops are doing much better and with their lower cost bases and consequently have taken huge bites out of the high street industry.

The leader in the on-line clothing sphere is ASOS (standing for “As seen on line”) and whose technology leading website and approach to sales has been impacting the market for clothes for some time. ASOS is a fantastic business and has been on my conviction buy list ever since I saw first-hand how terrified Debenhams management were of it when doing a strategy review for them in 2008.

Next though is the most successful clothing retailer in the country and one of the best, if not the best, performing stock on in the FTSE100 over 20 years. In CEO Simon Wolfson, they have a super and experienced Chief Executive. They are most certainly not going to go the way of Comet and have invested in a good online offering as well as their store catalogue – both actually act in complement to each other.

Just recently they announced their intents to carry a share buy-back when their share price is at an all time high – always an ominous sign for business that “suffer” a surfeit of cash as Apple pays testimony to in recent weeks! Last quarter’s results were not the best however with a warning of a tough time ahead and of course we have seen this week that headline Retail Sales in the UK fell sharply in October. It is not likely to be a good Christmas for retailers – again.

A look at the chart below looks to be setting up the feared double-top. Many people have been trying to pick the top in Next for some years and each and everyone has been steam rollered. Perhaps this time it’s safe to throw out a short? The downside could be as much as 300 points. There looks to be an alignment of both technical bearish analysis and a macro bearish situation in the near term adding weight to this argument.


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