Retailing giant Next slipped towards the bottom of the FTSE 100 after Berenberg delivered a scathing critique of the clothing store’s recent share price rally, warning that its resistance to change could lead to a similar demise as US photo firm Kodak.
Shares tumbled 124p to £42.71, a 2.8pc dive, after the broker argued that, while the retailer had quickly recognised the online opportunity, it had failed to fully adapt to the new e-commerce environment.
It had instead short-sightedly remained steadfast to past profitability models, it added, likening Next’s possible trajectory to Kodak’s plunge into bankruptcy as its lack of exposure to the emerging digital camera market began to bite.
It told clients that Next’s 9.5pc rally following its weather-distorted earnings beat earlier this month had now made the stock a prime shorting target, with traders betting its shares will fall – the practice of borrowing shares to sell and rebuy later when they have fallen in price to pocket the difference.
“We believe Next is burdened by its overspaced store estate, which restricts its ability to invest in areas that matter most to the consumer – product and free home delivery, leading to market share erosion,” the broker said, downgrading the stock from “hold” to “sell”.