Next PLC (LSE:NXT) strong first-quarter results drew praise from analysts on Friday, with Panmure Liberum calling the retailer’s 11.4% sales growth “a standout” and raising its price target to 13,000p from 11,500p.
Shares in the FTSE 100 clothing and homewares group rose on Thursday following the trading update and were steady again on Friday, supported by upgrades to full-year profit guidance and signs of continued momentum in both its core UK market and growing international operations.
Full-price sales in the UK rose 7.3%, but it was the 30% surge in Online International and a 15.7% increase in UK LABEL sales that stood out. Panmure said this performance was particularly impressive given a broadly declining UK online fashion market.
“The scale of UK LABEL growth reinforces Next’s growing role as the preferred multi-brand platform in fashion,” the broker said in a note. “It is hard to overstate the significance of that shift.”
The company has nudged its full-year pre-tax profit forecast up to £1.08 billion from £1.066 billion. Panmure expects more upgrades to follow and has lifted its own forecast above the company’s latest guidance.
While a recent cyber-attack forced rival Marks and Spencer to close its online operation temporarily in late April, Panmure believes any benefit to Next’s first-quarter sales from that disruption was minimal, though it could provide a small boost in the current quarter.
Next’s capital allocation also remains in focus. The group has paused share buybacks as the current valuation exceeds its minimum return thresholds.
Special dividends are likely to be used instead if the share price remains elevated.
Panmure said Next continues to offer the kind of steady earnings delivery and strategic clarity that investors are favouring in the current market. “In an environment where large-cap UK domestic earners are outperforming, Next stands out,” the note concluded, reiterating its buy rating.
The shares fell 2% to 12,130p.