Next slumps on Goldman Sachs downgrade

Goldman Sachs downgraded its stance on shares of Next to ‘sell’ from ‘neutral’ and cut the price target to 4,400p from 5,300p as it said the retailer is working hard to offset a structural shift to more intense online competition, but this is likely to result in no revenue growth post Covid-19.

GS noted that Next UK brand sales have been in decline for four years, driven by both falling store like-for-like sales and the largest online market share losses amongst peers.

"The most significant market share gains are coming from the pure-play online retailers/aggregators (ASOS, Boohoo and Amazon), TK Maxx and JD Sports," it said, adding that this trend appears ongoing as Next Online exits lockdown.

It argued that given its online maturity, Next UK brand online sales will benefit less than peers from the current Covid-19 related UK online penetration increase.

Goldman said that post Covid-19 disruption, it expects the Next UK brand to return to a year-on-year decline, driving Next brand UK EBIT down to less than £200m in FY25 from £412m in FY20.

At 1305 BST, the shares were down 3.2% at 4,868p.