Ride The Retail Boom With These High-Street Stars

The British retail sector is undoubtedly riding a crest of a wave on the back of an improving domestic economy. Indeed, the Office for National Statistics (ONS) revealed this week that UK retail sales leapt 6.9% in April from the corresponding month in 2013, representing the fastest rate of growth for 10 years.

With this in mind I have picked out three high-street stalwarts set to benefit from rising consumer activity.


British clothing goliath NEXT (LSE: NXT) is a stunning performer when it comes to keeping the tills ringing regardless of the broader economic picture. The company saw sales surge 10.8% during February-April, leading the company to increase its revenues and profits outlook for the year.

nextIn particular, heavy investment in its NEXT Directory online and catalogue division is paying dividends, and the firm saw sales here shoot 13.7% higher during the first quarter. As well, NEXT is also expanding its presence abroad — the business operates in more than 70 countries worldwide — and saw international sales rocket almost 90% higher in 2013.

City analysts expect the firm to print growth of 11% and 8% for the years concluding January 2014 and 2015 respectively. These figures create P/E multiples of 16.7 and15.4 for these years, readouts which I consider decent value given its electrifying history of earnings growth.

The retailer is also a great pick for dividend hunters. Although the firm’s progressive payout policy creates yields of 2.2% for 2015 and 2.5% for 2016 — below the FTSE 100 average of 3.2% — NEXT’s rolling share-buyback programme and history of doling out special dividends still makes it a decent income selection.

Marks And Spencer

British shopping institution Marks And Spencer (LSE: MKS) is a perennial joke amongst those in the fashion industry. Accusations of a frumpy Womanswear range remains a millstone around its neck, and the firm has been accused of failing to move with the times.

The business has ploughed huge amounts of time, effort and money into rejuvenating its beleaguered clothing lines, however, and marks & spencerthis work appears to be finally paying off. Like-for-like clothing sales rose for the first time during the final quarter of fiscal 2014 for the first time in three years.

Marks and Sparks‘ can also rely on its Food division to continue to outperform the market and drive sales higher, the firm reporting underlying growth of 1.7% here during the last year. And its international business also continues to report solid growth, thanks largely to its accelerating presence in Asian markets, and the firm saw total overseas sales stride 6.2% higher in 2014.

Broker consensus currently points to earnings expansion of 6% for the year concluding March 2015, with growth expected to ratchet higher to 12% in the following 12-month period. Such forecasts leave Marks and Spencer changing hands on P/E ratings of 13.1 and 11.7 for 2015 and 2016 respectively, well below the watermark of 15 or below which represents reasonable value.

Furthermore, the company is also predicted to get dividend growth rolling again this year after three years of keeping the payout on hold at 17p per share. Projected dividends of 18.1p for this year and 19.9p for 2016 create bumper yields of 4% and 4.4% correspondingly.

Pets At Home

Britain is undoubtedly a nation of animal lovers, so it makes sense that Pets At Home (LSE: PETS) — who only listed on the London Stock Exchange back in March — should benefit from rising consumer power as customers increasingly spoil their furry friends.

Pets at homeWith 369 stores nationwide, the animal house is far and away the UK’s largest pet accessory store. As of 2012 the company held a 12% market share in what is a highly-fragmented marketplace, and the company is planning aggressive store expansion to boost its share through new shop openings. Indeed, the company is looking to boost its store portfolio to 500 within the next few years.

And Pets At Home is dedicating itself to becoming a ‘one stop shop’ for all of your pet’s needs. The company acquired veterinary care specialists Vets4Pets in March last year which, added to its in-house Companion Care units, takes its number of  veterinary practices to around 220 outlets. Other services include The Groom Room and expert cat and dog diet advice from expert nutritionists.

City forecasters anticipate earnings growth of 20% for the year ending March 2014, results for which are due on Thursday, June 12. And the firm is expected to follow this with 13% growth this year, a projection which leaves the business changing hands on a price to earnings to growth (PEG) readout bang on the value benchmark of 1.

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Royston does not own shares in any of the companies mentioned in this article.