Next Plc: FTSE-100 Stock with Diversified Brand Portfolio

Next Plc (LON: NXT) is a Leicester, United Kingdom-based international clothing, home products, accessories, and footwear retailer.

Trading Statement with Declined Performance from Online and Retail Businesses (29^th April 2020)
The Group’stotal full-price sales (including interest income) declined by 38 per cent, reflecting 52 per cent decline from retail division and 32 per cent decline from the online division for the period between 26^th January 2020 and 25^th April 2020. NXT managed to mitigate cash costs due to lost sales with reduced lending for Online sales, operational cost savings, and stock cancellation. The company has a credit facility of GBP 1,575 million, which include bank facilities and bonds with a debt of around GBP 400 million for the period. The board will not be paying any dividend until the situation gets normal, and directors agreed to take reduced salaries and fees by 20 per cent.

Share Price Performance

Daily Chart as of May 28^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Next Plc shares were trading at GBX 4,974.00 at the time of writing before the market close (at 12:27 PM GMT+1) on 28^th May 2020 and up by 1.70% versus the previous day closing price. Stock's 52 weeks High is GBX 7,358.00 and Low is GBX 3,311.00.

From the technical standpoint, 14-day RSI is currently hovering in an overbought zone, and stock price can decline further.

Valuation Methodology
 

Key Risks
As the company operates worldwide, their financial performance can be dented with the fluctuations in the exchange rate and can also lead the company towards legal and regulatory risks. The market will remain challenging as customers make a fundamental shift towards the online marketplace.

Conclusion
Due to Covid-19 pandemic outbreak, the trading environment becomes challenging for the company. The financial performance was affected by the continuous weakening in the online platform and store closures. The growing online segment can help the company to improve its margins, but it will have a negative impact on the retail segment business due to a decrease in demand and higher operational costs burden. The group expect its sales from retail stores and online business to decline in the coming days. The group has re-opened its distribution channels, warehousing channels, and an online portal. There is also a risk that the company might not be able to compete with the established online players.

Based on the above factors, we recommend investors to keep a “Watch” on the stock at the current price of GBX 5,066 (as on 28^th May 2020, before the market close at 2.07 PM GMT+1 ), with support from few catalysts needs to be evaluated at a later stage.

Boohoo Group PLC – Why Boohoo Could be Worth Watching?

Boohoo Group PLC (LON: BOO) is listed on FTSE AIM 100 index and was founded in 2006. It is a Manchester-based retailer of fashion brands.

Recent News
On 28^th May 2020, the Group acquired the remaining 34% stake of prettylittlething.com Limited for a consideration of £323.8 million.

On 15^th May 2020,the Group completed the fundraising of £197.7 million in gross proceeds by equity placing of 58,140,591 shares.
Financial Highlights of FY20 (for the year ended 29 February 2020)

(Source: Company Website)

As on 22^nd April 2020, the group released its full-year 2020 statement and reported that the total revenue increase by 44 per cent in FY20 (versus FY19) to £1.235 billion. It was driven by sales growth across all geographic segments. However, the gross margin was down by 70 bps and stood at 54.0% in FY20. The adjusted EBITDA stood at £126.5 million in FY20 as against £84.5 million in FY19. At the end of the financial year, the Group reported a robust state of the balance sheet with £240.7 million in net cash.

Share Price Performance

Daily Chart as on 28^th May 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

BOO’s shares were trading at GBX 394.60 on 28^th May 2020 (before the market close at 12.29 PM GMT+1), up by 17.83% against the last day closing price. Stock's 52 weeks High is GBX 396.00 and Low is GBX 133.10.

From the technical standpoint, 3 days, 9 days and 14 days relative strength index of the stock was unfavourable, and the price could fall further from the current trading level.

Valuation Methodology
 


Valuation Metrics

(Source: LSE)

As on 30^th April 2020, EV/EBITDA and Price/Book multiples of the Boohoo Group PLC were 30.2x and 12.1x, which were higher as compared with the General Retailers industry. Hence, it is indicating that the Company is trading at a higher multiple against its peers.

Key Risks
The Group is trading close to 52-week high, raising doubts over further upside potential. The risk and impact of the pandemic is uncertain over the operations and hence, the management was unable to provide any guidance.

Conclusion
During the financial year 2020, the Group reported a strong performance, albeit the gross margin was slightly down. The Group continued the momentum even in the first two weeks of FY21; however, in the wake of COVID-19 from the middle March trading gave a mixed response. Due to the continually evolving state of the pandemic, the management was not able to provide any FY21 guidance. Further, the Group is anticipating supply disruption with warehouse closures and change in demand patterns. However, the Group shall be able to navigate short-run disruption through substantial liquidity to emerge strongly in the long run. Moreover, the Group is likely to bolster its position through the acquisition of the entire stake of PrettyLittleThing.

Based on the above rationale and risks associated, we recommend investors to keep a “Watch” on the stock at the current price of GBX 394.70 (as on 28th May 2020, before the market close at 12.11 PM GMT+1), with support from few catalysts needs to be evaluated at a later stage.

Marks and Spencer Group Plc – Britain’s Leading Retailer offering Quality and Great value Products

Marks and Spencer Group Plc (LON: MKS) is a supplier of clothing, footwear, home furnishings, beauty care, accessories, and foods products through a network of retail stores and online channels.

Financial Highlights – Declined Profitability in FY2020 (28^th March 2020)

(Source: Annual Report, Company Website)
 
For the financial year ending 28^th March 2020, due to a decline in revenue from clothing and home business, the revenue declined by 1.9 per cent to GBP 10,181.9 million as against GBP 10,377.3 million in FY2019. The pre-tax profit declined significantly by 20.2 per cent from GBP 84.2 million in FY2019 to GBP 67.2 million in FY2020. The PAT (profit after tax) declined by 39.5 per cent to GBP 27.4 million in FY2020 from GBP 45.3 million in FY2019. The basic earnings per share declined by 48 per cent to 1.3 pence, and dividend per share declined by 70.7 to 3.9 pence for the period.  

Share Price Performance

Daily Chart as of May 28^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Marks and Spencer Group Plc shares were trading at GBX 99.44 at the time of writing before the market close (at 1:11 PM GMT+1) on 28^th May 2020 and up by 0.38% versus the previous day closing price. Stock's 52 weeks High is GBX 242.20 and Low is GBX 73.90.

From the technical standpoint, 14-day RSI is currently hovering in an overbought zone, and stock price can decline further.

Valuation Methodology
 
 


Key Risks
The company has limited suppliers from which it sources its strategic raw materials and any breakdown in the supply would result in the company's inability to manufacture and satisfy customer demand. Any change in regulations and government policies could affect the overall business of the company.

Conclusion
The group has shown a decline in financial performance in the financial year 2020. Both the top-line and the bottom-line performance has declined for the period. The profitability has declined significantly for the period. The group operations are impacted by the outbreak of Covid-19 pandemic and will continue to see the impact in the coming period due to the change in consumer demand and behaviour. The group witnessed a decline in the clothing business, while the food business delivered good performance for the period.The company acquired a 50 per cent stake in Ocado Retail, which delivered decent revenue growth.

Based on the above factors, we recommend investors to keep a “Watch” on the stock at the current price of GBX 101.45 (as on 28^th May 2020, before the market close at 9:18 AM GMT+1 ), with support from few catalysts needs to be evaluated at a later stage.

Ted Baker Plc – Fastest Growth Lifestyle Brand in the UK

Ted Baker Plc (LON: TED) is a global lifestyle company which offers a range of menswear, womenswear, and accessories under its brand.

Board Changes
On 18^th May 2020, Ted Baker announced the selection of David Wolffe. Mr David will hold the responsibilities of CFO (Chief Financial Officer) effective immediately.

Company Update on Covid-19 and Additional Loan Facility (23^rd March 2020)
Ted Baker group announced the disposal of Big Lobster Limited for the consideration of approximately £78.75 million. As per the sale and leaseback agreement, the company will receive annual rent of GBP 3.25 million from the property. The group raised an additional credit facility of £13.5 million until 18 December 2020. The group has taken the required steps to reduce capital expenditures and operating expenses. By the time of update, the group had shut down 384 stores out of 416 sites globally. The Company was not able to provide any guidance but expect its underlying PBT (Profit before tax) to be in between GBP 5 million to GBP 10 million for FY20.

Share Price Performance

Daily Chart as of May 28^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Ted Baker Plc shares were trading at GBX 181.90 at the time of writing before the market close (at 1:50 PM GMT+1) on 28^th May 2020 and up by 10.24% versus the previous day closing price. Stock's 52 weeks High is GBX 1,483.00 and Low is GBX 90.05.

From the technical standpoint, 14-day RSI is currently hovering in an overbought zone, and stock price can decline further.

Valuation Methodology
 

Key Risks
The company witnessed wide fluctuations in the Personal Goods price in the UK market and expect the same in the coming future, which might have an adverse effect on the company’s financial performance. The group is currently facing both business and economic risk.

Conclusion
Ted Baker’s business is hammered by Covid-19 crisis across all their markets. As per the outlook released by the company previously, the group reported a significant decline in financial performance, both top-line and the bottom-line. At Present, Ted Baker has managed to reduce disruptions in the supply chain network, and operations in the Chinese region has resumed to the normal state. The group at present, unable to quantify the impact of uncertainty and failed to provide any guidance for FY2021. The company’s online business has been performing well and holds substantial inventory volume.

Based on the above factors, we recommend investors to keep a “Watch” on the stock at the current price of GBX 185.00 (as on 28^th May 2020, before the market close at 8:15 AM GMT+1 ), with support from few catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and Peer information have been taken fromRefinitiv, Thomson Reuters.

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