Next Model Update - we sit c.3% ahead of guidance

Research evidence excerpt

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Europe Equity Research

05 August 2026

Next

Neutral

NXT.L, NXT LN

Price (04 Aug 26):14,810p

Model Update - we sit c.3% ahead of guidance

▲Price Target (Jul-27):14,040p

Prior (Jul-27):13,030p

We update our model post Next’s strong Q2 27 trading update earlier today (see

more here). We raise our FY 27 PBT forecast by 3% to £1,276m (sitting c.3% ahead

of guidance), banking the Q2 beat and also now assuming a higher rate of Overseas

growth in the second half. We model H2 Overseas sales +24% yoy. We are certainly

mindful of some boost from pent-up demand in Q2 (+37% growth), and also that

Next will start to annualise support from the ZEOS roll-out from Aug (together

with WOBL roll-out internationally, we think these initiatives have provided over

10% points of support to growth). However, marketing spend continues to ramp up

- we note an implied Overseas incremental sales drop through rate to profit of

“only” c.15% in Q2 (vs what we would expect to be closer to c.30% if marketing

spend was at initially budgeted levels). we increase our multiples based from

13,030p to 14,040p to reflect the changes to our forecasts (end date Jul-27,

unchanged). We expect this spend to support a still strong growth rate into the

second half. In read across from the Next update to the wider sector, we think it

should be seen positively for Marks & Spencer. While Next beat UK

expectations, this was driven by LABEL, with stores and core Online Next Brand

sales both slightly negative in Q2 – implying some market share recapture for M&S

post the latter’s cyber attack in the prior year. On the other hand, we think the update

reflected negatively on Zalando – Next referenced some support in the quarter

from pent-up demand in Northern Europe - but Zalando yesterday missed slightly

on Q2 GMV growth (see more here).

European General Retail

Georgina Johanan, ACA AC

(44-20) 7134-5791

J.P. Morgan Securities plc

Shailja Maskara

(91-22) 6157-3318

J.P. Morgan India Private Limited

Specialist Sales contact details:

Olivia Petronilho - Specialist Sales European Consumer

(44-20) 3493-3709

Key Changes (FYE Jan)

Adj. EPS - 27E (p)

Adj. EPS - 28E (p)

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