I’m searching for the best FTSE 100 shares to purchase in April. Could these retailers be top buys in the current climate?
Is Tesco a top safe haven?
Inflation is having a devastating impact on living standards. Latest data from Office for National Statistics shows living standards in the UK are falling at their fastest rate since the mid-1950s as wages struggle to keep up with price rises.
In days gone by, food retailers like Tesco (LSE: TSCO) have been lifeboats for investors in tough times. Spending on food is one of the last things people tend to cut back on, after all. However, the emergence of discounters Aldi and Lidl means the established grocers are losing much of their lustre.
Tesco and its peers face a sharp decline in customer numbers as people move over to the low-cost retailers. They can slash prices to match the German businesses, of course, but this could cause their profit margins to crumble, even in spite of their enormous economies of scale.
The problem is particularly severe as both Lidl and Aldi embark on aggressive store expansion programmes too. Lidl has plans for 1,100 stores by the end of 2025, for example, up from fewer than 900 at present. And Aldi’s ‘click and collect’ service launched a couple of years ago is a challenge to Tesco’s online operation.
A risk too far
But Tesco has two major weapons in its arsenal. It has the biggest delivery service in the business, meaning it’s best placed to capitalise on the fast-growing e-grocery segment. Its highly popular Clubcard loyalty scheme also helps it defend against a loss of customers to its discount rivals.
It’s my opinion though that these qualities don’t offset the massive competitive risks that Tesco faces. And these threats are unlikely to be transitory either as its competitors rapidly expand while outside operators like Amazon ramp up their grocery businesses.
A better FTSE 100 stock to buy!
In this environment I’m eyeing another FTSE 100 retailer to buy in April. B&M European Value Retail (LSE: BME) is, unlike Tesco, poised to benefit from the rising pressure on shopper budgets in the near term.
And over a longer-term horizon, its aggressive store rollout programme should deliver steady profits growth too. The number of B&M-branded stores the retailer operators has risen 20% in less than five years to current levels around 700.
There’s no guarantee that further expansion will pay off, of course. Changing consumer habits for example mean that new stores could be ‘while elephants’ that seriously erode shareholder value. But as things stand today, I’m encouraged by B&M’s ambitious growth strategy.
The FTSE firm has designs on eventually having 950 stores across the country, though chief executive Simon Arora said last year this estimate could prove to be on the conservative side. I think B&M is in much better shape to deliver long-term earnings growth than Tesco. And I think it could be one of the best FTSE 100 stocks to buy in April as consumers feel the pinch.
