Achtung babies! 2 stocks (like this FTSE 100 firm) I’d still buy despite Germany’s economic slowdown

Forget about trouble in the German economy, I say! Here’s why I fully expect these stocks, including this FTSE 100 (INDEXFTSE: UKX) hero, to keep thriving.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

For stock pickers of all shapes and sizes, there’s two major macroeconomic issues that are dominating their behaviour right now. Namely, the immense economic and political damage a disorderly Brexit could cause in the UK, and the escalating trade dispute between global heavyweights the US and China.

Just look a few hundred miles eastwards from London though, and there’s a major crisis brewing which also poses a huge threat to the global economy. I’m speaking of the sharp economic slowdown in the continental engine room of Germany and the threat of contagion across the whole of Europe.

Unemployment is rising for the first time since 2013, industrial production is sinking at the fastest rate for four years, and the much-respected Ifo business confidence survey has sunk to levels not seen for almost a decade. There’s clearly a lot for market makers to chew over.

British bulldog

Particularly galling for B&M European Value Retail (LSE: BME) is the impact tough conditions in the Teutonic territory are having on shopper appetite, of course. Official data showed retail sales in the country sank 2% in April, while the latest GfK consumer confidence gauge slumped to 10.1 in May, the worst reading since March 2017.

B&M operates almost 100 stores in Germany, predominantly under the Jawoll brand, and has been no stranger to troubles in this foreign region. Indeed, in the last fiscal year, it swung to a £10.2m EBITDA loss, from a £5.6m profit the year before, reflecting the need to clear out obsolete product ranges and to source more product through the supply chain.

The retailer still has a long way to go to mend its German operations, a turnaround story made all the more difficult by the tough conditions on the high street there. I’m confident, though, that B&M can continue to deliver solid profits growth at group level despite these issues, paying testament to the ongoing progress at its UK divisions.

German expansion goes on

Primark, the retail clothing division of Associated British Foods (LSE: ABF), has also been in some turmoil because of the tough economic conditions in Germany.

Sure, the cost of its clothing may be mega cheap like the wares over at B&M, but this hasn’t been enough to stop sales from falling more recently. So tough have conditions been in Primark’s Central European territory that it’s taken steps to refresh management there as well as reduce selling space at a number of its stores.

Largely speaking though, ABF is confident enough in Primark’s long-term outlook that it’s opened stores in Berlin and Wuppertal since the start of the fiscal year, and is planning to cut the ribbon on a new unit in Bonn in the next few months.

International expansion has proven to be the cornerstone to ABF’s great Primark growth story in recent years. And with the business not slowing on this front, I expect it to keep impressing on the revenues front, despite problems in individual markets like Germany.

Primark has also proven to be an undisputed success story in the UK, showing the Footsie firm knows what it takes to thrive in an increasingly competitive marketplace during tough times for the average shopper.

I fully expect the steps it’s taking to bolster its global footprint will deliver exceptional profits growth in the years ahead.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »