Next boosted by Investec upgrade to 'buy'

It said that unlike peers, Next has been actively managing its portfolio over the last 10 years, something that is being overlooked by investors preoccupied by short-term trading.

"Next's estate is well-invested, and in our view margins appear sustainable, even if retail like-for-like sales continue to fall. Post FY18, profits should stabilise even if consumer demand remains weak, with some self-help. In our view, valuation doesn’t reflect Next's qualities as a well-invested business with strong and sustainable cash flows."

The brokerage highlighted the fact that Next's store portfolio has undergone more than just a refit. 53% of Retail's square footage didn't exist 10 years ago, even though store numbers have risen by just 12% since the start of full-year 2008.

In addition, Investec said new space is highly profitable and reflect an active property strategy, with new stores contributing around 40% more than company average. "Profitable new space continues to generate a profit buffer each year versus negative LFLs," it said.

Investec also said cash generation remains robust, with surplus returns looking secure.

"Next remains a well-invested highly cash generative business, with £500m+ per annum of free cash flow and over £255m of surplus cash (free cash flow less ordinary dividends). Even if FY18e profit before tax falls another 3% to the bottom of guidance, Next still expects to generate £255m of surplus cash. This highlights the security of the capital return."

At 1018 BST, the shares were up 2.2% to 4,422p.