Next PLC (LSE:NXT) looks set to deliver another profit upgrade next week, although Shore Capital warned that a modest increase may not be enough to propel shares beyond their recent highs.
The broker retained its Buy rating and 15,000p target ahead of the retailer’s second-quarter update on 5 August. The target is broadly in line with Next’s current price of 15,045p after a roughly 20% rise since March.
Shore Capital expects improving UK clothing sales during May and June to help Next beat its conservative forecast for second-quarter UK sales growth of 1%. That guidance followed growth of 4.4% in the first quarter and reflected tough comparisons with last year’s favourable weather and disruption at rival Marks & Spencer.
“The stage is set for an upgrade,” analyst David Hughes said.
Next has issued 19 profit upgrades since the beginning of its 2024 financial year and has already raised its FY27 adjusted pre-tax profit guidance twice to £1.218 billion.
However, Shore Capital expects the next increase to be closer to 1%-3%. It estimates that an upgrade of around 6%-8%, lifting earnings per share towards 830p, may be required to sustain the current valuation.
Margin gains could also prove harder to deliver. A later start to warmer weather has encouraged more promotional activity across the clothing market, while Next previously identified £47 million of additional costs linked to the Iran conflict.
