Lockdown fears haunt markets, Next’s summer sales shine

“The FTSE 100 plumbed depths not seen in months as it fell through the 5,700 mark. Investors are waking up to the risks associated with a second wave in the coronavirus pandemic,” says AJ Bell Investment Director Russ Mould.

“News that France is considering a full-scale national lockdown amid surging cases is unsurprisingly spooking the markets with Germany among other European countries also looking at tighter measures. And with the number of infections and hospitalisations mounting in the UK, pressure will likely mount on the Government to follow suit.

“Companies which just about scraped through in the spring may not survive another period without any business despite the generous state support which has been announced.”

Next

“As a chain of shops Next has inevitably been hit hard by covid-19, as this latest update shows, but that doesn’t disguise the fact that as a business it gets an awful lot right.

“It is just good at retail; its online offering has improved, bolstered by carrying third party brands on its site, and it is up to speed on the very important basics of cost control, management of stock and generating plenty of cash.

“Next is also very good at being a public company – its levels of transparency and its communication with the market are second to none and it also has a handy knack of managing expectations.

“By under promising it has been able to over deliver, signalling that sales over the summer came in better than forecast.

“These are all elements under Next’s control - what it can’t do anything about is the course of the pandemic and the restrictions brought into tackle it. If the rest of the UK follows Wales in announcing the closure of non-essential retail then it will suffer a hit.

“What you can be pretty sure of is that it will be prepared this time round and at least investors are getting a detailed read on how sales might perform under different scenarios.

“The strength of Next’s brand, proposition, balance sheet and infrastructure should also set it up to be a retail survivor which can thrive in a recovery.”

These articles are for information purposes only and are not a personal recommendation or advice.