Broker snap: Next's sector discount unjustified

UBS has nudged up its price target for Next after the fashion retailer's trading update on Wednesday.The broker has left unchanged its prediction of a 1% decline in like for like sales over the full year for the High Street operations but has revised its forecast for the online and catalogue business, Directory. UBS now thinks Directory's full year sales will grow 3%, having previously forecast 1% growth.The broker has raised its fiscal 2010/11 full year profit before tax forecast from £540m to £560m.Analyst Andrew Hughes notes that the stock trades on a discount to the retail sector of around 10%, "We think Next should trade in line with the peer group given recent market share gains, space expansion and cash generation," Hughes argues. Its discounted cash flow-based price target has been raised to 2500p from 2350p. The broker'ss "buy" recommendation has been maintained.