Mike Ashley buys up Next shares

Mike Ashley has owned a shareholding in Next since last year – a fact that has not been widely known in the City until this week. The serial retail entrepreneur, who owns the Sports Direct and House of Fraser brands through the Frasers Group, bought a £60 million holding (1 million shares) in the clothing and household retailer through the investment vehicle last year.

However, the group recently sold half its shareholding in Next, after the shares rose by 15%, and now holds 500,000 shares.

The Financial Times reported the holding using shareholder information from Argus Vickers. However, because Frasers’ stake represents less than 3% of Next’s total voting rights, the company did not have to complete a regulatory filing on it. The information has been publicly available on Bloomberg terminals for months but largely escaped investors’ attention, it said.

Fraser’s Group, run by Ashley’s son-in-law Michael Murray, has also purchased stakes in Boohoo and Currys, issuing a statement confirming this this week. The company said that it has “a clear strategy to identify opportunities to invest in businesses which complement our existing sport, premium and luxury businesses, or help us to build and further utilise our sector-leading ecosystem.”

Next’s surprise trading boost

Meanwhile, Next shares rose 5% earlier this week after the company posted an unscheduled but upbeat trading statement on Monday. The retailer told investors that full-price sales in the last seven weeks were up a surprise 9.3% compared with a forecast fall of 5% in the second quarter. As such, the company has increased its earnings guidance to pre-tax profits of £835 million - £40 million higher than previous expectations of £795 million for the full-year. It said it had beaten its sales targets during the period by £93 million.

Chief executive Simon Wolfson said that annual wage increases in April, along with the warm weather, had encouraged consumers to spend out on its products.

Next sales fillip to run out of steam

However, on the downside, Next does not expect this trend to continue to play out, given stubborn inflation levels. The Bank of England raised interest rates to 5% on Wednesday due to disappointing inflation figures out this week, revealing core inflation, which strips out energy, food and tobacco prices, to have hit 7.1% in May.

Next previously warned on profits in March, revealing 2023 would be a “challenging year” due to cost price inflation and higher clothing sales prices.

Analysts at Berenberg Bank, which has a ‘neutral’ recommendation on the shares, raised their price target to 7,000p from 6,500p this week.

Shares in the retailer have had a good run this year and are up 12% to 6,612p. However, they are still some way off their five-year highs of 8,440p, seen in December 2021, and given the company’s solid position in retail continue to be worth holding.

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