Broker snap: Next deserves to trade at a premium, says UBS

In spite of the poor weather and higher promotions, UBS says that High Street giant Next has once again 'surprised on the upside' in the second quarter, leading the broker to lift its target price for the stock from 3,500p to 3,750p.Next Brand sales in the second quarter were 7.5% higher year-on-year, well above the 3.3% growth elected by UBS, with both Retail and Directory beating estimates. The full-year pre-tax profit guidance range is moved from £560-610m to £575-620m on the back of raised sales guidance."Directory may have been helped by poor weather but this is also the first positive like-for-like (comparison) in Retail for 10 quarters. This reflects better product (inc recovery in Home), the benefit from footfall driven by competitor promotions and maybe also MKS stock shortages," UBS said.The broker says that, trading at 12 times current-year earnings, Next has moved to a small premium to its sector peers. Nevertheless, this "looks well worth it on this performance".UBS has maintained its 'buy' recommendation for the stock.BC