Broker snap: No rush to buy more Next shares

15th Sep 2010 13:33

The market has reacted favourably to the trading update from Next but with the share price homing in on KBC Peel Hunt's target price of 2300p the broker is sticking with its 'hold' recommendation, though it does rate the stock as its favourite general retailer among FTSE 100 constituents."Once again, Next has delivered double-digit profit growth from margin and overhead control, benefiting from a strong sales gain at Directory. While the outlook remains challenging, a point the statement covers to exhaustion, shareholder returns remain attractive," states analyst John Stevenson.Profit before tax at the interim stage was up 15% year on year to £213m, but fell short of KBC Peel Hunt's forecast of £218m. Against a "turgid and depressed" backdrop for retailers Next's management sees scope to deliver profit before tax growth of between 6% and 12% in 2011 and medium term shareholder returns of 9-15%, making the shares an attractive proposition."However, with short term uncertainty likely to drive the sector backwards ahead of Christmas, as industry reported sales backtrack, we see the shares treading water over the coming 3-4 months and see no reason to chase the shares for now," Stevenson concludes.