Redburn double upgrades Next to 'buy'

Retailer Next got a boost on Wednesday as Redburn double-upgraded the stock to 'buy' from 'sell', saying the drop in the shares represents a good buying opportunity.

When it downgraded the stock to 'sell' in July 2013, it was worried about peak margins and the diminishing range of opportunities to deploy new capital.

Management were able to push back maturity, first via hitting fashion trends and then expanding lending, Redburn said.

"However, over the last eighteen months progress has stalled and far-reaching questions are now being asked of a business and CEO that have so long been sure-footed. The more than halving of the shares since the fourth quarter of Q4 2015 has created an opportunity."

Redburn said fabulous returns at Next reflect its unusual ability to grow like-for-like gross profit ahead of inflation, develop a highly profitable lending book and invest wisely.

"Great financial management has been facilitated by strong retailing and customer understanding."

It said Next is advantaged by its robust brand and business model. While industry pressures are severe, they will squeeze Next’s many thin margin/highly-geared peers earlier, and more profoundly, opening up opportunities, Redburn said.

At 1056 GMT, the shares were up 3.5% to 3,959p.