Next shares jump 7% today. Should this be my first buy of 2023?

Despite a 24% drop in the past year, the Next The change in the stock price of NXT.BE for today is 7.45%. These big gains come on the back of a strong Christmas trading period. This surprised me, as obviously many others have because of the number of purchases they have made today. So could this be a defensive stock to buy to help me navigate this year?

Details of the report

First let’s understand the important points of the trading update. Guidance for the nine weeks to the end of the calendar year is a 2% decline in full price sales compared to last year. In fact, they are 4.8% higher than in 2021.

Most of these benefits come from in-store purchases, versus online shopping. This is another positive and shows that physical locations are still a place for some retailers.

That means full-year profit guidance for Next has increased to £860m. A £20m uplift due to be completed this year.

Even with the cautious outlook on the update that 2023 could be a challenging year, Next Investor took the overall report very positively.

I don’t believe it

I don’t like to be pessimistic, but I think that the excitement of the day of the update can be a little overdone.

A strong performance is impressive, but I don’t see this happening in 2023. The economic cocktail of rising inflation, higher interest rates and lower wage growth all mean that the average person on the street will feel the pinch.

Of course, this pinch will be felt in H2 2022 as well. Maybe Next’s sales increase could be due to customers buying credit cards, or burning through their savings to avoid disappointment with Christmas presents?

While I can’t say for sure, today’s news just doesn’t fit the other narratives coming out of big companies, I feel.

Is this a defensive buy?

Even as a defensive pick, I don’t think Next will be my favorite buy for recession 2023. I don’t think apparel and home retail are areas that will do well in a tough year.

However, I’d rather look at utility stocks or insurance providers to give my cash a safer place right now.

I could be wrong in the negative view on Next. The company is clearly bucking the broader market trend and may continue to be an outlier. In this case, investors will be able to buy the shares, which will be higher in the coming months.

A recent deal in December to take majority ownership of Joules could also help provide a positive boost to future results.

But the Next won’t be the first purchase of the year, despite the good news now.