Next PLC (LON:NXT) shares are not likely to go much higher any time soon, broker Liberum suggested, as it downgraded its rating on the clothes retail bellwether.
Interim results from the FTSE 100 group showed its continued improvement in trading in the second half of its financial year to end-January 2021, with full price sales up 4% in the past seven weeks.
READ: Next tumbles to loss but says online shopping habits are sticking
Next boss Simon Wolfson has bumped up his central guidance scenario for the year to a 20% decline in full price sales, versus the previous estimate of a 26% drop, with a profit before tax and leases of £300mln, which will be down 59% on the prior year.
Liberum analyst Wayne Brown said he continues to favour Next’s positioning in the market, especially as it rolls-out future focussed business models like Platform Plus and Total Platform, where it sells clothes from brand partners from Armani and Barbour to Superdry and Vans.
Next also flagged that “it appears that some lockdown habits have stuck”, with online clothing sales significantly stronger since stores reopened than before the coronavirus pandemic struck.
But the analyst said the shares “have had a decent run”, up 19% in the last three months and 82% from the lows in April 2020.
The market valuation of 16.4 times forecast earnings per share for the 2022 financial year, versus a 12-month forward multiple of around 15 at the start of 2020, has, Brown said he believed, “caught up with recent events”.
Therefore the broker’s recommendation to ‘hold’ from ‘buy’, with the target price under review.