The Next (LSE: NXT) share price was on the front foot this morning (4 January) as the retailer reported stonking Christmas sales figures.
Could the stock reach and push through the 1,000p barrier this year? I certainly don’t think it’s beyond the realms of possibility.
Bumper Christmas sales
Full-price sales in the final two months of 2023 were better than management had predicted. A 5.7% increase from the previous year added an extra £38m to Next’s coffers.
As a result of this, the FTSE 100 member chose to raise its guidance on pre-tax profit to £905m. That’s £20m up on previous projections. If this came to pass, it would also be 4% higher than the previous year.
But the good news didn’t stop there.
Looking ahead, Next believes full-price sales will rise 2.5% in FY25 (beginning in February).
Should this happen, the company expects pre-tax profit will come in 5% higher than FY24.
Wealth-builder
Of course, no self-respecting Fool would judge a stock just by what happens on one particular day (or one reporting period). It’s a company’s performance over the long term that matters most to me.
With this in mind, Next more than delivers. The share price has climbed 90% over the last five years as I type. And this doesn’t include the impact of dividends.
For comparison, the FTSE 100 index is up a measly 13%.
If I wanted evidence that taking the time to separate the wheat from the chaff and backing only high-quality companies has the potential to generate to market-beating results, here it is.
Where next for the share price?
As one would expect, nothing can be guaranteed when it comes to stock markets. But I do think the current momentum could continue and a 15% rise in the share price (to 1,000p) is realistic.
A cut in interest rates, however small, would send a strong signal to consumers that the post-pandemic economic clouds were beginning to lift. This could lead to a rise in discretionary spending. That would benefit a lot of sectors, particularly battered retailers.
On the other hand, there are reasons for thinking the Next share price may have peaked for now.
The possibility of a cut to rates has been known for a while, so at least some of this news may already be reflected in the valuation. One could see a scenario where at least some traders are keen to bank profits. The stock — while not wildly overpriced — is already above its average valuation over the last five years.
On top of this, there’s a chance of Next’s supply chain being disrupted for a while as a result of shipping companies diverting away from the Red Sea. This issue — highlighted in today’s statement — has arisen due to assaults on boats by groups that have declared support for Hamas.
Better buys?
Given its tendency to under-promise and over-deliver, I can’t say I’m completely surprised by today’s news from this bluest of blue-chip high street players.
Is Next the best stock to buy for 2024, though? I’m not so sure. I think there could be quite a few candidates for that crown, particularly from the beaten-down growth stock space.
It’s those that I want to buy more of right now.
