When looking for the best stocks to buy in the month ahead, I often start by checking what just happened in the one we’re just leaving behind.
One FTSE 100 name jumped out at me. Retail giant Next (LSE: NXT) ended October almost 17% higher, comfortably ahead of the second-best performer, drug maker GSK. I already hold GSK in my Self-Invested Personal Pension but sadly, I don’t hold Next. Probably because I never quite believed my eyes whenever I looked at its performance.
Retail is supposed to be a disaster zone. Whole chains have collapsed under the weight of the cost-of-living crisis, soaring rents, and the march of online shopping. April’s hike to employer’s National Insurance contributions and the minimum wage hikes have piled on more pressure. Yet through it all, Next keeps defying gravity. The shares are up 43% over the last year and 195% over three years, with dividends on top. It makes a mockery of Britain’s supposed retail gloom.
Yet more upbeat results
Every time I thought the run was too good to last, Next proved me wrong. The latest leap followed its third-quarter results on Wednesday (29 October), which thumped expectations yet again. Full-price sales rose 10.5% year on year in the 13 weeks to 25 October, more than double guidance for a 4.5% rise. UK sales were up 5.4%, overseas sales surged 38.8%, and management raised full-year profit guidance by £30m to £1.13bn.
Those numbers would be impressive in any climate, but especially now. Begbies Traynor’s Julie Palmer called Next “the gold standard in UK retail”, growing in a sector that’s struggling to stay afloat. It even benefited from a temporary online shutdown at rival Marks & Spencer after a cyber-attack, which sent some shoppers its way.
High-flying shares rarely come cheap. Next trades on a price-to-earnings ratio of 23.6, well above the market average of 18. Yet growth prospects are higher too. Analysts at Berenberg lifted their target price from 14,700p to 17,800p after the results, implying roughly 25% growth potential from today’s 14,265p.
The trailing dividend yield is a modest 1.6%, but there’s now a special payout of around £3.10 per share pencilled in for January 2026.
Next’s growing international footprint also makes it more resilient, giving it reach well beyond the UK’s fragile high streets. It’s a textbook example of how to evolve and survive in a tough market.
Time to take a look
Next isn’t just a single-brand story, so investors shouldn’t fixate on that. It owns UK rights to Gap and Victoria’s Secret, and holds stakes in Reiss, Joules, FatFace, and others. That portfolio gives it multiple ways to grow, especially if inflation and interest rates start easing, leaving shoppers with a bit more to spend.
Given its relentless run, I can’t call Next a bargain. Personally, I still prefer to target underperforming companies that are potentially on the cusp of recovery. I can see plenty of them out there, and they will be top of my shopping list in November.
Yet, I’m wildly impressed by Next’s discipline, innovation, scale, and resilience in tough times. I think investors could still consider buying Next shares with a long-term view. This unsung hero is beating the market in style.
