Next PLC's (LSE:NXT) latest upgrade was impressive even by its own standards, although analysts said the retailer's premium valuation left little room for its run of forecast-beating performances to falter.
Shares climbed 6.2% to 15,725p after second-quarter full-price sales rose 9.2%, against company guidance of 4% and market expectations of around 6-7%.
Deutsche Bank analyst Adam Cochrane described Next's record of continuous earnings upgrades as "nothing short of remarkable", particularly as chief executive Simon Wolfson marks his 25th year in charge.
The scale of the overseas performance provided the biggest surprise. International sales surged 36.9%, against Deutsche's 20% forecast, while UK sales increased 2.8%.
The question is how much of the overseas growth can continue. Next attributed the performance partly to "pent-up demand" in the Middle East and Northern Europe, but also to its ability to spend more on marketing.
Jefferies analyst Frederick Wild said investors were likely to view the marketing gains as more important than the one-off release of pent-up demand, potentially providing momentum for the second half.
Next raised full-year pre-tax profit guidance by £25 million to £1.2 billion, but left second-half sales guidance unchanged at 5%.
Shore Capital analyst Clive Black said this appeared conservative. "While some of the recent growth may be attributed to one-off factors (hotter weather, pent-up demand) the stronger return on marketing speaks to continued opportunity internationally, while UK comps are also less demanding in the second half.
"Thus this guidance looks once again on the conservative side to us, leaving scope for further beats down the line."
Black retained a 'buy' recommendation, saying Next was delivering the performance required to justify a valuation previously described as "priced for perfection".
Peel Hunt's John Stevenson said the performance demonstrated Next's "broad reach" through its Label third-party brand platform and portfolio of equity investments, but retained a 'hold' recommendation.
His caution reflects a valuation of around 18 times forecast earnings.
For now, analysts appear willing to tolerate the premium multiple: Jefferies' Wild called Next a "rare bright light in European retail", while Deutsche's Cochrane "we expect [it] to be maintained as long as the upgrades keep coming".
