NXT: Future Cash Returns Will Remain Supported By Robust Margin Outlook

The analyst price target for NEXT has been raised materially, with the midpoint increasing to roughly GBP 15,000 per share from about GBP 13,000. Analysts attribute this change to slightly faster expected revenue growth, stronger profit margins and a supportive rerating of the shares in recent research.

Analyst Commentary

Bullish analysts have continued to lift their price targets for NEXT, reflecting growing confidence that the company can deliver above trend revenue growth and sustain attractive margins over the medium term. The recent series of upward target revisions signals that the market is increasingly willing to ascribe a higher multiple to the shares, provided the group executes on its strategic and operational plans.

Across recent notes, analysts highlight a combination of resilient consumer demand, disciplined cost control and effective inventory management as key supports for earnings visibility. The positive revisions also embed expectations that NEXT can leverage its strong brand, online platform and third party label partnerships to drive incremental growth without a commensurate rise in capital intensity.

At the same time, more cautious voices remain focused on the risk that expectations and valuation may now be running ahead of fundamentals, particularly if macro conditions soften or input costs reaccelerate. Neutral stances, including from JPMorgan, suggest that while the direction of travel for earnings is positive, the balance of risk reward at current levels requires careful monitoring.

Against this backdrop, the latest target increases converge around a scenario in which NEXT delivers steady, if not spectacular, top line expansion while defending its margin profile, supporting a premium rating versus much of the broader UK high street peer group.

Bullish Takeaways

Bullish analysts see the repeated target upgrades as evidence that NEXT is executing well on its omni channel strategy, which they view as justifying a structurally higher valuation multiple compared with domestic retail peers.
Upward revisions embed confidence that revenue growth can outpace the broader UK apparel market, driven by online penetration, platform partnerships and continued share gains from weaker competitors.
There is growing conviction that margins can be maintained through tight cost control, pricing discipline and mix benefits. This is seen as supporting double digit earnings growth and underpinning the elevated price targets.
The higher targets assume that management will continue to allocate capital effectively, balancing shareholder returns with selective investment in technology, logistics and brand positioning to support growth.

Bearish Takeaways

Bearish analysts argue that, after the recent rerating, much of the medium term earnings improvement is already reflected in the share price. In their view, this may limit further upside without clear positive surprises.
There is caution that macro headwinds, including pressure on discretionary consumer spending and potential cost inflation, could challenge the optimistic growth and margin assumptions embedded in current targets.
Some remain wary that increased reliance on third party brands and platform revenues may introduce execution risk, particularly if partner performance or customer loyalty weakens from current strong levels.
Neutral stances emphasise that any misstep in inventory management or online fulfilment could quickly erode margins, prompting a reassessment of the premium valuation that is currently being ascribed to NEXT.

What's in the News

Raised full year 2025/2026 guidance, now expecting Total Group sales of £6,870 million versus prior guidance of £6,720 million (company guidance).
Announced intention to return surplus cash via a special dividend at the end of January 2026, currently estimated at around £3.10 per share, assuming no acquisitions or further buybacks (company announcement).
Declared an interim ordinary dividend of 87 pence per share for the year to January 2026, with payment due on 5 January 2026 and ex dividend date of 4 December 2025 (company announcement).

Valuation Changes

The fair value estimate has risen slightly, with the modelled intrinsic value per share increasing from £141.57 to £142.22.
The discount rate has edged down marginally, moving from 9.07 percent to 9.04 percent, modestly boosting the present value of future cash flows.
Revenue growth has been revised up slightly, with the long term assumption increasing from 6.41 percent to 6.49 percent.
The net profit margin has increased meaningfully, with the forecast margin raised from 12.36 percent to 13.04 percent.
The future P/E has been trimmed moderately, with the assumed forward earnings multiple reduced from 22.5x to 21.4x.

Expanding international business through strategic marketing and modernized operations aims to increase revenue growth and resilience against inflationary pressures.
Investments in technology and AI-driven efficiencies intend to reduce costs, improve margins, and enhance earnings through diversified revenue streams and strategic acquisitions.
Concerns over stagnant retail sales, new store risks, markdown impacts, increased working capital needs, and warehouse disruptions may pressure profitability and operational efficiency.

Catalysts

About NEXT

Engages in the retail of clothing, beauty, footwear, and home products in the United Kingdom, rest of Europe, the Middle East, Asia, and internationally.What are the underlying business or industry changes driving this perspective?

NEXT is focusing on expanding their international business, particularly by leveraging aggregators and optimizing marketing strategies, which is expected to drive international sales and eventually improve overall revenue growth.
The company's investments in warehousing mechanization aim to enhance operational efficiencies and reduce labor costs, which could help improve net margins or maintain them despite inflationary pressures.
NEXT plans to continue expanding its Online platform with a focus on non-NEXT branded offerings, including wholly-owned brands and subsidiaries, which could significantly boost earnings and diversify revenue streams.
The investment in modernizing technology and implementing AI-driven efficiencies is expected to reduce technology costs and improve output, positively impacting net margins and potentially increasing earnings over time.
The anticipation of improved sales in certain international territories, alongside cautious management of surplus cash and strategic acquisitions, may enhance earnings per share as the company leverages buybacks and maintains investment grade credit ratings.

NEXT Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming NEXT's revenue will grow by 5.9% annually over the next 3 years.
Analysts assume that profit margins will increase from 12.0% today to 12.6% in 3 years time.
Analysts expect earnings to reach £918.5 million (and earnings per share of £8.07) by about September 2028, up from £736.1 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.1x on those 2028 earnings, up from 18.7x today. This future PE is greater than the current PE for the GB Multiline Retail industry at 13.0x.
Analysts expect the number of shares outstanding to decline by 2.94% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.9%, as per the Simply Wall St company report.

NEXT Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The decrease in retail sales by 1.1% in the UK market and the indication that physical retail locations are trading water at best suggest potential ongoing challenges in maintaining or increasing revenue through this channel, leading to pressure on overall profitability.
NEXT has highlighted concerns over the profitability of new store expansions, describing the risk as something they are most nervous about, which could lead to inefficiencies and impact net margins if they fail to deliver expected returns.
The company anticipates significant markdown impacts on profitability due to normalizing stock levels and previous markdown strategies that are not repeatable, which may erode net margins if not managed carefully.
Concerns over increased working capital requirements, particularly due to a £92 million increase influenced by stock investments, indicate potential cash flow challenges that could affect net earnings if not efficiently managed.
The potential for disruptions during warehouse transitions, as noted in their previous experiences, poses a risk to sales and operational efficiencies, which could impact both revenue and net margins during these periods.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of £128.16 for NEXT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £147.0, and the most bearish reporting a price target of just £114.7.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £7.3 billion, earnings will come to £918.5 million, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 8.9%.
Given the current share price of £118.3, the analyst price target of £128.16 is 7.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

International Expansion And Technology Investments Will Support Future Value Creation