2 monster FTSE 100 retail stocks to buy now

Suraj Radhakrishnan explains why these two FTSE 100 retail stocks are on his buy-list to capitalise on the recent retail boom.

| 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.

When I look at the business environment right now, I see global retail markets opening up. Fuelled by vaccination efforts, people are returning to malls and stores again and this means one thing to me — a retail boom.

Even though the pandemic put e-commerce into overdrive, I believe that store shopping retains its charm. Retail stocks reflect this and are surging despite fears of a market crash. I have earmarked these two FTSE 100 retail stocks as possibilities for my portfolio. I think they could benefit from the return of foot traffic to stores.

British luxury retailer

Fashion retailer Burberry (LSE: BRBY) has been on a turbulent run in the market. The recent news of China’s wealth distribution efforts have raised concerns about the spending potential of the wealthy in the country. But I think the market is overreacting. Here’s why.  

China’s luxury goods market is estimated to be $52.2bn and is second only to the US. The Asian market’s spending potential is growing every year. I think this news will just be a minor blip, and analysts agree with me. Predictions show that China’s luxury goods market could become the world’s biggest by 2025, and FTSE 100 retailer Burberry could benefit greatly from this.

Despite the falling share price, Burberry’s first-quarter (Q1) 2022 financials looked excellent to me. Retail revenue was £479m, up 86% from the same period in 2021. Store sales rebounded by 90% and the company expects its wholesale sales to grow 60% in the first half of 2022 as well.

However, investor sentiment has been impacted by China’s crackdown and could prove detrimental in the short term. But, with 459 stores worldwide, I expect the iconic British luxury fashion brand to benefit from the return of tourism and retail traffic. Despite the risk of further share price drops, I have been watching this FTSE 100 retailer for a while and think it is an excellent buy for my long-term portfolio right now.

Sports fashion giant

JD Sports Fashion (LSE: JD) is another retailer that has been on my radar for quite some time. Its share price exploded recently after the company released its excellent first-half (H1) results. Profit before tax for the period was £364.6m, up a whopping 754% from H1 2020.

I had written about JD Sports’ acquisition strategy in August and its investments in the US have proven fruitful. The FTSE 100 retailer acquired over 500 stores in the region via multimillion-dollar deals with DLTR Villa and Shoe Palace. Total profit before tax in the US was £245m, up from £73.4m in 2020. The recent acquisitions contributed £72.9m, reinforcing my faith in the company’s business strategy.

The company has signed a deal with Clipper Logistics, which strengthens its thriving e-commerce presence. I see this as a huge positive after the pandemic-driven online retail surge. Although the sports fashion industry is ruled by giants like Nike and Adidas, I think JD Sports is carving a nice little niche.

Combining online retail with an aggressive expansion of brick and mortar stores in North America looks to me like a winning strategy. The market has reacted positively to its latest results with share prices up 10.2% in the last month. The company definitely keeps its spot on my list of FTSE 100 retail stocks to buy.

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.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Nike. The Motley Fool UK has recommended Burberry and Clipper Logistics. 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

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »