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Britain's FTSE slips from record high as Next slumps
January 4, 2017 / 10:05 AM / 9 months ago

Britain's FTSE slips from record high as Next slumps

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* FTSE 100 flat

* Next shares tank after profit warning

* Housebuilders find support from note

By Kit Rees

LONDON, Jan 4 (Reuters) - Britain’s top share index traded flat on Wednesday, edging down from a record high hit in the previous session as shares in Next slumped after the retailer issued a profit warning.

The blue chip FTSE 100 index was flat in percentage terms at 7,175.72 points by 0945 GMT, having hit an all-time high of 7,205.45 points on Tuesday.

Next tumbled 9.5 percent to hit a two-month low after the retailer cut profit guidance for its current financial year and warned on the outlook for the next, highlighting “exceptional” levels of uncertainty in the sector.

In its Christmas trading update, Next said its central guidance for its year to Jan. 2017 was for pretax profit of 792 million pounds ($971 million), down from the 805 million pounds it had previously forecast.

“Next has been a market darling for a long time thanks to its highly rated management team and consistent delivery of high operating margins and surplus cash, whatever the macro environment,” analysts at Jefferies said in a note.

“Yet with earnings now confirmed to fall for a second year, it does feel as though this time Next has few levers left to pull.”

Shares in peers Marks & Spencer and Primark-owner Associated British Foods also tumbled 5 percent and 3.6 percent respectively. Mid cap Debenhams was down 4.9 percent.

There was a silver lining for the British retail sector, however, as mid cap B&M jumped 6.6 percent following its quarterly update.

The British discount store chain said that a record Christmas drove a strong third quarter, helping UK like-for-like sales rise 7.2 percent.

“Given a lot of investor sentiment has focused on the weaker-than-expected LFL, this should provide some relief over the sustainability of the sales growth,” analysts at UBS said in a note.

British housebuilders were also stronger on Wednesday, with Barratt Developments, Taylor Wimpey and Persimmon rising between 1.4 percent to 2.5 percent, helped by a positive note on the sector from Deutsche Bank.

Deutsche Bank said that they saw close to 30 percent upside across the housebuilding sector as a whole. Housebuilders lost more than 20 percent in 2016.

“After a tumultuous 2016, we see appealing value in the UK Housebuilder sector. While investor appetite for UK focused stocks remains more moderated reflecting Brexit risk, we see dividend yield as difficult to ignore,” analysts at Deutsche Bank said in a note. (Editing by Catherine Evans)

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