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Best Does Not Mean Good

04 January 2017 by lberuti

Investors did not have to wait long to get some action in 2017. It was all about UK retailers today. NXT ( Next Plc ) released a trading update for the period running from Nov 1st to Dec 24th and they delivered the first disappointment of the post-Christmas retail sales reports. Branded full price sales fell 0.4% while the consensus was for a 2.2% increase. The miss stems from retail (-3.5% vs est +0.5%) while Directory (ie online) was in line (+5.1% vs est +5.0%). Consequently, NXT expects pre-tax profit in the current fiscal year to be towards the lower end of its previous estimates, and to be even less the year after. As the company is usually one of the winners during the all important festive period, that statement did not go down very well, and UK retailers’ risk premia were pushed aggressively wider. The 5-year CDS of NXT, MKS ( Marks and Spencer Group Plc ), MTNLN (Matalan Finance Plc) and NEWLOK (New Look Senior Issuer Plc) were marked 13bps, 12bps, 95bps, and 61bps wider at 122bps, 164bps, 1758bps and 839bps respectively. Meanwhile, the broader credit market enjoyed another positive session and indices closed at new tights for the current series.