Liberum upgrades Next to 'buy' following strong Christmas trading performance
Analysts at Liberum upgraded clothing retailer Next from 'hold' to 'buy' and reiterated its 8,300.0p target price on the stock following some "very resilient" Christmas trading.
As a result of Next's holiday trading beating expectations, Liberum reinstated its forecasts and added estimates for a full-year 2022 pre-tax profit of £653.0m, an 88% year-on-year improvement.
Liberum did note that its expectations were 3% below the company's central scenario guidance of £670.0m as it assumes store closures through to the end of April and, while the group was now predominantly an online business, with more than 60% of sales being sourced over the internet, stores were still "key to its success".
"We remain positive about further online growth as Next attracts new brands and develops the Platform Plus, Total Platform and licensing models," said the analysts.
"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."
Liberum also highlighted opportunities for retail outperformance and mergers and acquisitions as many high street competitors have now collapsed as a result of the Covid-19 pandemic.