The Subsequent (LSE: NXT) share price jumped 10% in early buying and selling Thursday (27 March), on the again of outcomes for the yr ended January 2025. It dropped again a bit, displaying a 6% achieve on the day on the time of writing.

The high-street trend chain hit the £1bn profit-before-tax milestone for the primary time ever. At £1.01bn, it’s up 10% over the earlier yr. Whole group gross sales elevated by 8.2% with full-price gross sales up 5.8%. Earnings per share (EPS) rose 9.9%, benefiting from the corporate’s share buyback programme.

Sector stress

The highly-competitive trend enterprise has been below the squeeze for a while. Shares in Burberry Group, for instance, are down 40% previously 5 years. And the 87% drop at Debenhams Group (previously boohoo) over the identical interval is nearly too painful to have a look at. The Subsequent share price, going nicely in opposition to that development, has climbed 164% in 5 years together with the spike on outcomes morning.

CEO Lord Wolfson mentioned it was uncommon “to begin a year on an optimistic note, yet that was our stance this time last year.” He added that “the worst of the retail-to-online structural shift gave the impression to be behind us, the pandemic was nicely and actually over, and the price of dwelling disaster was abating.“

The sector isn’t out of the woods but although, because the boss warned: “We expect the UK tax rises in April to weaken the UK employment market and negatively impact consumer confidence as the year progresses.” It’s going so as to add round 1% to costs, he mentioned.

Steerage lifted

Regardless of the issues the style retail enterprise nonetheless faces, Subsequent has upped its steerage for the present yr. Full-price gross sales for the primary eight weeks are already forward of expectations. The board now expects a full-year full-price gross sales rise of 5%, with pre-tax revenue up 5.4%.

Bearing in mind the consequences of anticipated additional buybacks, we may very well be on for an 8.5% improve in EPS by January 2026.

I virtually forgot the dividend. At 233p whole it represents a yield of two.3% on the earlier closing share price. It won’t be one of many largest on the FTSE 100. However the outlook for this yr signifies cowl by earnings of two.8 occasions. And that enhances my confidence in progressive future rises.

Bullish consensus

Is a forecast price-to-earnings (P/E) ratio of 16 good worth? If Subsequent can preserve up its spectacular revenue trajectory, I believe it may very well be. But when I’ve realized something from the previous few horrendous years for the retail enterprise, it’s that I want a security margin in any shares I contemplate shopping for.

Against this, Marks & Spencer is on a forecast P/E of solely 12 even after its spectacular restoration. And it has diversification into meals, househould items and all the remainder, which helps shield the enterprise in opposition to single-sector weak spot.

Nonetheless, I believe anybody on the lookout for the UK’s finest long-term trend enterprise with probably the strongest administration within the sector (reasonably than Debenhams/boohoo, which I truly purchased), ought to contemplate Subsequent.