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(Sharecast News) - Citi upgraded Next on Tuesday to 'buy' from 'neutral' and lifted the price target to 18,400p from 15,500p as it took a look at the European retail sector.
The bank said Next's international segment has grown at a +20% five-year sales compound annual growth rate and is now more than 20% of product revenues. "It continues to see opportunity for profitable growth via investment in marketing and is future proofing its fulfilment capacity to support ambitious growth," Citi said.
"We model a +17% 4year sales CAGR FY25a-FY29e for international and anticipate a further circa 10 percentage point mix shift over the next four years.
"With reducing exposure to the UK and superior growth, we believe Next now commands a higher multiple versus its own long-term average (circa 14x) as investors start to compare Next with a more global fashion retail peer set."
It added that Next's expected forward total shareholder return is now closing the gap to best-in-class global peer Inditex, which has historically traded at a circa 23x forward P/E.
Citi also upped its price target on Marks & Spencer, to 470p from 390p, reiterating its 'buy' rating as it sees structural tailwinds in both Food and Fashion.
"Incrementally, we assess the margin opportunity in Fashion (versus Next) and believe the Lichfield warehouse will unlock margin benefits from FY29e onwards," it said. "The strength of M&S' Food business is apparent, with Worldpanel data suggesting it is likely to post +DD% sales growth in 1H26e (Citi: +13.1%)."
At 1145 BST, Next shares were up 2.4% at 15,635p and M&S was 2.8% higher at 395.60p.
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