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(Alliance News) - Next PLC is a "clear winner" in the UK fashion market as warm weather boosts its sales, Liberum said.
Liberum analysts Anubhav Malhotra, Wayne Brown and Adam Tomlinson noted that some "store-based competitors" are leaving the high street, and even online retailers, such as boohoo and Asos, are working to get their houses in order.
"Even within online, platforms like Next and Zalando are taking share from branded and wholesale models," the Liberum analysts commented.
Earlier this week, the Leicester, England-based clothing and homeware retailer said trading in the last seven weeks was "materially better than the guidance".
Next said full price sales in the first seven weeks of its second quarter were up 9.3% year-on-year, a sizeable beat to the forecast of a 5% fall. Next's second quarter ends on July 29.
The firm lifted its pretax profit guidance to GBP835 million from GBP795 million previously. It would represent a 4.1% decline from GBP870.4 million a year prior.
"We note this as a very strong performance by Next in the context of the continuing decline in the UK online clothing market, which was down again 6-7% year-on-year in May while the online home market was also down 1-2% year-on-year," the analysts said.
Liberum pointed to the strength of the brand's online sales, with 60% of its sales coming from the online business, but also noted the benefit of its in-store offerings.
"Next's omnichannel presence, no significant inventory overhang, free in-store click and collect and return options, growing third-party brands' presence on its LABEL platform and customer's trust on its quality and value for money offering in these inflationary times have all contributed to Next’s taking share of the market."
Owing to the company's strong trading, the analysts upgraded their pretax profit estimate by 5% to GBP846 million in financial 2024, up from GBP805 million.
"We continue to remain slightly above the company guidance of GBP835 million as we believe it remains overly conservative about the potential for full price sales growth over the rest of the year."
"We remain optimistic on Next's prospects as the transition from stores to online is over, new capacity comes online in October and multiple new avenues for growth remain."
Next shares rose 0.1% to 6,704.00 pence each in London on Wednesday morning.
By Harvey Dorset, Alliance News reporter
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