RBC Capital Markets has raised its price target on UK retailer Next to £163, signaling growing confidence in the company's ability to transform from a domestic apparel chain into a global e-commerce player. The move comes as the bank highlights faster-than-expected growth in international online sales and easing cost pressures that could support margins.
What's Behind the Upgrade
In a research note on European retail, RBC lifted its earnings-per-share forecasts for Next and maintained an "Outperform" rating. The bank's analysts pointed to the company's "Rest of World" segment—which includes markets like the United States—as a key driver of future growth. While international sales currently account for roughly 25% of Next's total revenue, RBC expects that figure to rise to more than 40% within the next 10 years.
The optimism is rooted in Next's ability to scale its online platform internationally from a relatively small base. Lower shipping and input costs are also expected to support the company's profitability as it expands abroad. This is a notable shift for a retailer that has long been viewed primarily as a UK-focused business.
Next has been investing heavily in its online infrastructure and logistics network, which has allowed it to compete more effectively with global e-commerce giants. The company's Total Platform service, which offers its technology and fulfillment capabilities to third-party brands, has also opened up new revenue streams without the capital intensity of opening physical stores.
What It Means for Investors
For everyday investors, the RBC upgrade underscores a broader trend: traditional retailers that successfully pivot to e-commerce can unlock significant value beyond their home markets. Next's international push mirrors moves by other apparel companies that have used digital channels to reach customers in regions where they have no physical presence.
The raised price target of £163 implies upside from current trading levels, though investors should remember that price targets are just estimates and not guarantees. The key takeaway is that RBC sees Next's growth story as far from over, with international expansion providing a long-term tailwind.
Cost pressures, which have weighed on many retailers over the past two years due to inflation and supply chain disruptions, appear to be easing. That could help Next protect its margins even as it invests in growth. Lower shipping costs, in particular, benefit a company that ships products directly to customers around the world.
Investors should also consider the broader context. The UK retail sector has faced headwinds from weak consumer confidence and higher interest rates, but Next has consistently outperformed many of its peers. Its online-first model and disciplined inventory management have been key advantages.
For comparison, other companies are also looking overseas for growth. Japanese footwear retailer ABC-Mart, for example, has set a target of generating 50% of sales from international markets as its domestic population shrinks. That story, covered in ABC-Mart Targets Overseas Sales at 50% as Japan's Shrinking Population Limits Growth, highlights a similar strategic pivot.
What to Watch Next
Investors will be watching Next's upcoming earnings reports for evidence that the international growth trajectory is accelerating. Key metrics to track include the pace of "Rest of World" revenue growth, the contribution from the Total Platform, and any updates on cost trends.
The broader market environment also matters. If global trade tensions or currency fluctuations impact shipping costs, that could affect Next's international margins. However, RBC's analysis suggests that the current tailwinds are strong enough to support the upgraded outlook.
Next's ability to maintain its momentum will depend on execution. Scaling an online business across multiple countries requires navigating different consumer preferences, payment systems, and regulatory environments. So far, the company has shown it can do this effectively.
For investors looking for exposure to the retail sector, Next offers a case study in how a legacy brand can reinvent itself for the digital age. The RBC upgrade is a vote of confidence that the transformation still has room to run.
