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Next (NXT) £11.49

UK retail sales growth data came in higher than expected last week (Thursday 20 March), growing 1% from last month and 5.5% year on year. The fashion retailer’s shares bounced back on the news after a battering the day before when the company reported full-year results. Next says 2008 will be tough and forecasts underlying sales to fall between 4% and 7% in H1. The company also posted a 4.1% rise in pre-tax profits, but Credit Suisse cut its taxable profits forecasts for 2008/09 and 2009/10 by 10% and 8% respectively, reflecting the company’s guidance. The dividend estimates were also reduced, as the investment bank now anticipates a flat payout in the current year. This resulted in a 15% reduction in its target price to £17 and to us it sounds like a clear shorting opportunity in the near term. Listening to Credit Suisse pundits, ‘Next will start to be valued on a more strategic basis as the capital markets lose patience with progress on re-positioning the brand.’ Go short with a stop loss at £12.17.

ACTION: SELL Next • Target £10.34 • Stop loss £12.17

TIME TARGET: 5 weeks