Broker snap: Next's results could spark re-rating

14th Jul 2009 12:10

Singer Capital Markets has lifted its target price for Next ahead of the fashion retailer's second quarter update, expected on 29 July.The broker has edged up its target price for Next from 1725p to 1800p and upgraded its recommendation to "buy" from "fair value", after upgrading current year earnings forecasts by 3.3% and next year's by 3.3%.Singer is expecting "another decent quarter" for Next, despite management guidance that the second quarter would prove tougher than the first, if only because of going up against tougher comparatives. Singer expects improved performance to be driven by upgrades to the product range and continued seasonal selling conditions.Margins may also get a boost from "a combination of [rent] review negotiations and expiries," Singer predicts. "After a prolonged period of LFL [like-for-like] sales declines at Next, which has lasted 4 years thus far, any sort of evidence suggesting that sales trends are beginning to stabilise, particularly at this point of the cycle, would be well received by the market and should provide support for a re-rating," the broker believes.