Shares jumped almost 10% at one point as the clothing and homewares chain said sales had jumped by 19% over the past three months thanks to a combination of warm weather, pent-up demand and people having more cash.
UBS raised its profit forecast for the year to January 2022 by 4% to match Next’s new GBP750mln guidance, which it notes is after the payment of GBP29mln for business rates relief during Covid-19.
While UBS said investors had expected a special dividend, the magnitude was a pleasant surprise with a payment of 110p in September to be followed by a second in January.
Neutral with a price target of 8,300p is UBS’s investment view.
Berenberg, meanwhile, has reversed its sell recommendation from last September and upped its price target to 7,100p, saying that clearly, the trading backdrop is very supportive currently.
Even the stores are doing better than it envisaged, though it notes that, unlike peers, Next has yet to restructure its properties.
“About 50% of Next’s online orders collected through stores and 85% of returns made through them, a restructuring programme would likely either harm online growth or have to be combined with a shift to free delivery, causing a margin rebase.”
Shares rose 8% to 8,000p.