Citi upgraded Next to Buy from a previous view and raised its price target to £184 from £155, citing the retailer’s expanding international presence and improving profitability outlook. The stock rose more than 1% in London trading alongside Marks & Spencer, which Citi maintained a Buy rating on.
Analysts noted Next’s international segment has delivered a 20% five-year compound annual growth rate, accounting for over 20% of product revenues. Citi forecasts a 17% four-year sales CAGR for the segment through fiscal 2029. The upgrade reflects Next’s reduced exposure to the U.K. market and its positioning among a broader global fashion peer set, where it now trades at roughly 14 times forward earnings—above its long-term average.
Citi also reiterated its Buy rating on Marks & Spencer, highlighting progress from the retailer’s £67.5 million warehouse acquisition in Lichfield, acquired from ASOS earlier this year. The site is expected to expand M&S’s online fulfillment capacity by more than 200% compared to its Castle Donington facility. While dual running costs of about £30 million are projected to weigh on margins in fiscal 2028, benefits are forecast to materialize from fiscal 2029, with a modeled 3-percentage-point improvement in online EBIT margin by fiscal 2031.
M&S’s Fashion EBIT margin remains roughly 5 percentage points below Next’s, with an even wider 10-percentage-point gap in online margins. Both retailers maintain similar gross margins, but M&S operates with a higher cost base due to a less sophisticated logistics network. Fulfillment and technology costs each represent approximately 4 percentage points more of sales for M&S.
In M&S’s food division, Citi projects 13.1% year-over-year sales growth in the first half of fiscal 2026, though price investments are expected to pressure gross margin by 120 basis points in fiscal 2027, followed by 30 basis points in fiscal 2028 and 2029.
