Clothing retailer NXT (Next) released its trading statement today, sending the shares down 11.5% to 4222p in early trading. The shares dropped nearly 5% yesterday, so market expectations were clearly bearish. In their outlook statement they said:
The fact that sales continued to decline in quarter four, beyond the anniversary of the start of the slowdown in November 2015, means that we expect the cyclical slow-down in spending on clothing and footwear to continue into next year.
NXT is very highly regarded in the transparency of its reporting.
I won’t dissect the report further, as I am sure that there are others with plenty of comments to make.
The recent DB (Deutsche Bank) analyst report (https://goo.gl/CCxDe7) spelled out the up-coming danger in advance. It confirmed what I was expecting.
With the benefit of hindsight, I am of course glad I sold out late last year, and did not wait until the new year. A rare case of prescience on my part.
If I was already holding, I would probably sell as part of my trading rules. That does not mean that you should sell, of course. NXT is comfortably into value territory now, so I understand that there may be those who want to hold on. The shares look a bit trappy to me at the moment, though. I don’t like saying this, because the chief executive Lord Wolfson seems an honest and capable man.
As I mentioned in a tweet, I was hearing signs that internet retailers were doing well. It seems at the expense of the high street. The lack of reports of brisk trading in stores is what lead me to the conclusion that I needed to sell.
DEB (Debenhams) is down 4.4% to 52.64p in sympathy. I think it has a bearish chart:
You will notice a downtrend indicated by an arrow, followed by a gap down. The greyed box indicates a “consolidation zone”. I know practically nothing about charting, but I tend to view these consolidation zones as marking time ready for a resumption in the previous trend. When consolidation ends, the next move tends to be violent.
The fundamentals are not good. Technically it’s not good either. It is teetering on breaking support. We could get a rebound, but I don’t think the odds favour it. That being the case, my guess is that it is ready for the next leg down. That will not be pleasant for holders.
As ever, we shall see. Stay safe out there.