Next risks losing its shirt in a ‘Kodak moment’, warns broker
RETAILING giant Next slipped towards the bottom of the FTSE 100 after Berenberg delivered a scathing critique of the clothing chain’s recent share price rally, warning that its resistance to change could lead to a similar demise as US photo firm Kodak.
Shares tumbled 124p to £42.71, a 2.8pc dive, after the broker argued that, while the retailer had quickly recognised the online opportunity, it had failed to fully adapt to the new ecommerce environment. It had instead short-sightedly remained steadfast to past profitability models, it added, likening Next’s possible trajectory to Kodak’s plunge into bankruptcy as its lack of exposure to the digital market began to bite.
It told clients that Next’s 9.5pc rally following its weather-distorted earnings update earlier this month had made the stock a prime shorting target, with traders betting its shares would fall.
“We believe Next is burdened by its over-spaced store estate, which restricts its ability to invest in areas that matter most to the consumer – product and free home delivery, leading to market share erosion,” the broker said, downgrading Next from “hold” to “sell”.
Elsewhere, German airline Air Berlin filing for insolvency propelled its rival easyjet to the top of the blue-chip leader board as hopes surfaced that the no-frills carrier could now bump up its market share.
The low-cost airline brushed off claims yesterday from French pilots that it is risking safety with its cluttered flight schedule to finish 57p higher at £13.22.
Analysts believe that fellow German operator Lufthansa is best positioned to snap up the debtburdened company’s assets but London-listed operator
TUI has also been sounded out as a possible buyer, lifting its shares 29p to £13.19. British Airways owner IAG flew 18p higher to 631p from a read across, while FTSE 250 carrier
Wizz Air jumped 130p to £29.32, albeit on the paltry trading volumes typical of this time of summer.
On the wider index, the effects of investors returning to riskier assets started to wear, but the pound’s 1pc plunge against the dollar lifted London’s exporters as the chances of an interest rate rise at the Bank of England subsided on yesterday’s weaker-thanexpected inflation data. Buoyed by sterling’s slump, the FTSE 100 advanced 29.96 points to 7,383.85.
China-exposed mining stocks dropped as fresh data pointed to a slowdown in the Asian powerhouse’s housing market and weaker demand for commodities.
BHP Billiton and Rio Tinto slid 19p to £13.42 and 37.5p to £33.76, respectively, while Randgold Resources suffered most from gold and silver’s continued retreat, diving 235p to £72, a 3.2pc fall.