Next PLC (LSE:NXT), the clothing retailer, has left analysts “encouraged” after it said profits were expected to come in £10 million higher than previously predicted.
“While Next's upgrade may be considered modest, it is encouraging and highlights the fact that consumer demand remains robust,” analysts at Shore Capital said.
Having been impressed by Next’s second quarter performance and its “improved clearance rates”, Shore Capital analysts were quick to point out the profit upgrade still represented a year-on-year decline of 2.9%.
“Nonetheless, this positive outlook suggests that Next is well-positioned to navigate the challenging market conditions and is taking necessary measures to sustain its profitability,” the investment group concluded, rating the stock a 'Hold'.
Over at Peel Hunt, analysts were impressed by a 22% year-on-year reduction of the number of clothes being placed on sale, which it attributes to a “strong full-price sell-through”.
Clearance rates are ahead of internal forecasts and the UK bank reckons this will result in pre-tax profits rising by £4 million.
Remaining cautious about consumer spending in the second half, Peel Hunt it isn’t too worried as Next only needs to achieve 0.5% full price sales growth for the rest of the year – representing around £16 million in additional revenues.
Peel Hunt rates the stock a ‘Buy’ and targets a 7,000p share price, representing around a 1.5% premium to the current value, which opened on Thursday at just under 6,920p.