Next PLC a ‘buy’ again for Liberum over potential to outperform

() was upgraded to ‘buy’ from ‘hold’ by Liberum as analysts see opportunities for retail outperformance and mergers and acquisitions as many high street competitors have collapsed.

The broker reinstated the target price of 8,300p after “very resilient Christmas trading which beat expectations”.

READ: Next hardly seems to have put a foot wrong in 30 years

Among reinstated forecasts, Next is expected to deliver £343mln of profit before tax this year, with online operating margin benefitting from substantially higher sales as well as improved gross margin from lower markdowns.

In retail, second-half loss is estimated to be much lower than in the first half helped by a smaller sales decline, partly offset by the £40mln additional property provision.

Profit before tax is forecast to come in at £653mln in financial year 2022, reaching £836mln in 2023 – finally topping last year’s £728mln.

The FTSE 100 fashion powerhouse is now predominantly an online business, with e-commerce accounting for over 60% for group sales, but stores are still “key to its success”, according to Liberum.

“We remain positive about further online growth as Next attracts new Brands and develops the Platform Plus, Total Platform and licensing models,” analysts commented.

“Retail profitability will be supported by the ongoing rent renegotiations and potential rates reform, while the finance income is underpinned by a quality debtors book.”

Shares were flat at 7,656.6p on Thursday morning, now trading 6% higher than pre-pandemic levels.