RBC Capital and UBS emphasise the 'positives' in Next's update

Analysts at RBC Capital said Next's trading update was "slightly mixed" but that recent share price weakness meant any short-term negative news had already been factored-in.

As regards the wider sector, "we think the statement today is a positive read for the UK apparel sector," the Canadians added.

On the positive side of the ledger, online sales were "strong" against "tough" comparables and were ahead of expectations, RBC said, while reiterating its 'outperform' recommendation and 6,300p target price.

To take note of as well, the 'exit rate' of full price sales improved throughout December, the broker explained, although at down by around 10.3% the drop in like-for-like sales in Retail was worse than the 8.3% fall that the analyst consensus had penciled-in.

RBC also highlighted the fact that the retailer was fully-hedged against FX risks for the coming fiscal year.

"Expectations for FY20 guidance were somewhat muted given the negative read-across from other retailers. We think the outlook for Next Online looks decent given the Brexit uncertainty and its potential impact on the UK economy.

"Next is fully hedged for FY20, which we think is a competitive advantage given the recent GBP weakness versus the USD, and particularly if this weakness continues into the year."

Their rivals at UBS were only a tad less upbeat, cutting their target for the online fashion retailer's shares from 6,600p to 6,000p, albeit while sticking to a 'buy' recommendation on the same.

However, Next's last two weeks of trading highlighted how "the benefit of holding full price for as long as possible. The reported trading period has been rounded up to a full nine weeks to give better comparability."

The Swiss broker also trimmed its estimate for the company's profits before tax in fiscal year 2020 from £753m to £725m "largely as a result of macro weakness", although that was still "slightly" better than guidance from Next's management.

"There will be upside from industry capacity reduction," UBS said.

For its valuation of Next's shares, UBS had penciled-in a so-called terminal rate of growth of 2.0% for the company's sales, a terminal rate of margins of 15% (which was down from 17%) and a weighted average cost of capital of 8.0%.