Could trouble on the high street hit these share prices?

As consumers switch to online shopping, could the share prices of these businesses plummet?

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Last week, greetings card company Clintons announced – just ahead of the crucial Christmas trading period – that it will be closing shops and looking to slash rents as parts of its survival efforts. Similar woes have been hitting its retail peers, and especially high street shops, for a number of years.

As online shopping rises, could these two share prices come under pressure due to changing consumer preferences?

Trouble on the high street

Back in September Card Factory (LSE: CARD) announced that interim profits fell 14%, attributed to Brexit stockpiling and higher wages. In an update for the nine months to the end of October, the company said group revenue grew 5%, up from 3.4% growth in the same period a year ago. Year-to-date like-for-like sales were up 0.9%.

Reflecting the rise of consumers buying online, website sales were up 16.2% in the third quarter, taking year-to-date revenue growth to 21.9%, slower than 70.9% the previous year.

Operating in the mass-market and being highly dependent on key seasonal events such as Christmas, the retailer will have to sell more and more ancillary products such as wrapping paper to keep growing. There is a dividend yield of 5.8% for shareholders at a cheap P/E of around nine, but I think the trouble at Clintons goes to show just how tough a business this is to be in.

Trouble with CVAs

FTSE 100 property company Landsec (LSE: LAND) sits on the other side of the negotiating table from retailers looking to use CVAs to slash rent costs and survive. The group has ownership of 40 retail assets in the UK, including a share of the Bluewater shopping centre in Kent.

The group revealed recently that challenging retail conditions meant it had swung to a loss in its first half. In the six months to 30 September, it made a pre-tax loss of £147m from a profit of £42m in the first half of last year, with revenue up just 0.4% to £225m.

Compared to 40 or so retail-related assets, it has about 67 properties that fall into the leisure, residential and workspace categories. An example of these types of properties include Brighton Marina and the Dominion Theatre in London.

Given its exposure to retail, I’m surprised the shares have increased in the past 12 months – albeit by a modest amount. The P/E is now hovering around 15, which feels a little high compared to other sectors that are struggling. But it is similar to the ratio for competitor British Land.

To address the question I posed, about whether these share prices could fall – potentially sharply – I’d say in the case of Card Factory, it’s distinctly possible and I see the high yield and low P/E as an indicator of a lack of investor confidence in the company. For Landsec, I think the shares look expensive, but are less likely to fall sharply. 

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.

Andy Ross owns no share mentioned. The Motley Fool UK owns shares of Card Factory. The Motley Fool UK has recommended British Land Co and Landsec. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »