What's going on?

Next, one of the UK�s largest clothing retailers, reported on Thursday that its profits had dropped for the first time in eight years. But, given that its stock price shot up 8%, investors appeared relieved that the news wasn�t worse!

What does this mean?

Next put out a gloomy report to investors on Thursday: it said that its sales had declined in 2016 and that sales would remain weak through the start of this year (before, hopefully, picking up somewhat later this year). It also didn�t have much good to say about the UK economy, which accounts for over 80% of its customer base. Next�s CEO said he was worried that British consumers will continue spending less on clothes this year, and that the trend might get even worse if inflation keeps going up in the UK.

Why should I care?

The bigger picture: A weaker currency is typically bad for importers.

Thanks to the pound�s big drop in value in 2016, Next reported that it�s been increasingly expensive to import garments from abroad, which caused the price of its clothes to spike by 4%. Virtually any company that imports goods (or supplies) and sells its products domestically is hurt when the value of its home currency falls � which is one reason why changes in the values of currencies have such a significant impact on stock prices.

For markets: Despite the tough environment, Next has some redeeming qualities.

For one, most of Next�s stores are on relatively short-term leases, which means it can close stores more quickly than its rivals if it needs to cut costs. Also, Next�s stock was down about 50% over the past 18 months prior to Thursday�s results: investors are well aware of the challenges it faces. Finally, it did not cut its profit forecast this year, suggesting that Next�s future prospects aren�t as bad as some investors had feared. All of that probably helped the stock jump more than 8% on Thursday.