Next PLC (LSE:NXT) is among the retailers best placed to weather a looming consumer downturn, with analysts warning that weaker players will fall further behind as spending tightens.
RBC Capital Markets said tougher conditions are likely to accelerate the gap between winners and losers, as shoppers become more price sensitive and selective, with the FTSE 100 retailer identified as a stock to buy on recent weakness.
The broker expects pressure on discretionary incomes to drive consumers towards value and “newness”, favouring retailers with strong product ranges and efficient operations. Next’s broad offering and online capabilities were highlighted as key advantages.
By contrast, Associated British Foods PLC's (LSE:ABF) Primark was flagged as less well-positioned, particularly outside the UK, where trading has been weaker and the lack of a digital offer limits flexibility.
RBC was also cautious on Action, the discount chain backed by 3i Group PLC (LSE:III), arguing its valuation looks “relatively full” given a softer demand outlook and questions over growth in new markets.
The note points to previous downturns, when stronger chains consistently gained market share at the expense of independents and weaker competitors.
With consumer conditions deteriorating again, analysts expect that pattern to repeat, with performance divergence across the sector set to widen.