Credit Suisse cuts Next to 'underperform', slashes price target

The bank said it was becoming increasingly cautious about Next’s ability to stabilise margins in an environment of rising opex and input costs, and with brand sales looking increasingly mature.

“In particular the strategy of passing through higher costs, in a deflationary environment, and continuing to add space, seems likely to lead to cost de-leverage, without increasing productivity gains,” CS said.

The bank had upgraded the stock back in May as it reckoned the environment in the second half and through 2017 would start to improve, but it no longer believes that, as sterling weakness is likely to hit UK consumption and input costs as FX hedges roll off in H2.

“We are also concerned about the maturity of the Next Brand, and the sustainability of large market shares in a fragmenting apparel market, where store portfolios are of decreasing relevance.”

At 0940 GMT, Next shares were down 0.5% to 4,956p.