Next PLC (LSE:NXT) and Marks and Spencer Group PLC (LSE:MKS) both offer structural growth opportunities that could support earnings even as the wider UK consumer outlook remains uncertain, according to RBC Capital Markets.
For Next, the story is increasingly international, analyst Richard Chamberlain said, feeling that the clothing retailer's online growth opportunity overseas remains significantly underappreciated.
He pointed to partnerships with Zalando, About You and potentially Amazon in the US as routes to a much larger addressable market than investors currently assume, estimating international sales could more than triple over the next decade if market share gains continue.
The attraction is not just growth but profitability, with RBC calculating that falling oil prices and a firmer UK labour market could reduce cost pressures, allowing clothing price rises in spring 2027 to be closer to 4% rather than the 8% previously feared.
RBC's share price target for Next was raised to 16,000p from 15,500p, versus a last close at 14,365p and the 'outperform' rating reiterated.
For M&S, the focus is food rather than fashion.
Chamberlain argues the retailer remains well positioned in premium, healthy and speciality food, where consumers continue to spend despite broader economic pressures.
The analyst highlighted consistent food outperformance, product innovation and strong momentum through the Ocado joint venture.
Yet M&S also illustrates the limits of the recovery story, as while food continues to outperform, Chamberlain remains cautious on clothing margins.
Promotional activity, online mix and the lingering effects of last year's cyber incident could weigh on profitability for general merchandise.
RBC's 375p target price and 'sector perform' rating were maintained.
