Next PLC (LON:NXT) sparked mixed reactions in the market after once again increasing its full-year profit guidance, with some analysts downgrading their rating on the shares.
After the FTSE 100-listed clothing retailer upped its guidance to £727mln from the previous £725mln, both Berenberg and UBS increased their forecast by £2mln to £728mln and £727mln respectively.
READ: Next hikes full year profit guidance as Christmas trading beats forecasts
Berenberg raised its share price target to 6,140p from 5,600p, reiterating its ‘hold’ recommendation due to continuing pressure on margins.
This pressure is seen coming from ongoing negative store like-for-like sales and a shift in mix towards lower-margin third-party product, analysts said in a note.
There is potential upside, however, from Label, Next’s standalone fashion website, which is deemed an “increasingly attractive opportunity to take share”.
UBS kept its ‘buy’ rating unchanged, with a high 7,200p price target, based on expectations that sales and profit will benefit from “capacity exit” in the mid-range fashion market plus self-help initiatives supporting growth.
Société Générale, however, downgraded the stock to ‘sell’ from ‘hold’, although hoisted its target price to 6,588p from 6,301p.
For the period from 27 October to 28 December, Next reported that full-price sales had risen 5.2%, 1.1% ahead of their estimates, as 15.3% growth in its online division offset a 3.9% decline in sales from its stores.
Shares remained muted at 6,914p on Monday at noon.