3 Retail Stocks Set To Soar: Tesco PLC, Debenhams Plc & Marks and Spencer Group Plc

With the Conservative victory likely to have a positive impact on the UK economy, now could be a great time to buy UK-focused stocks. After all, the last five years have seen Tory-led policies thrust the UK towards being one of the fastest growing economies in the developed world and, while spending cuts are likely to act as a drag over the next few years, the outlook for companies that rely upon the UK for a significant proportion of their sales appears to be positive.

Furthermore, with UK interest rates unlikely to move higher at anything more than a pedestrian pace over the next few years, retailers may continue to benefit from improving consumer confidence and cheap credit. And, with this in mind, here are three UK-focused retailers that could be worth buying at the present time.


Even though shares in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) have risen by an impressive 24% since the turn of the year, there could be much further for them to go as a result of improving investor sentiment. In fact, the turnaround plan for the struggling retailer has only just begun, with its results yet to be witnessed. As such, with Tesco forecast to increase its bottom line by 5% next year and by a further 20% in the following year, now could be a good time to buy a slice of the company ahead of improved financial performance.

Certainly, the stock is likely to remain volatile. But, for long term investors, this volatility presents an opportunity to buy one of the UK’s most successful retailers while it is trading at a relatively attractive price. For example, Tesco has a price to earnings growth (PEG) ratio of just 0.7, which indicates that its shares have considerable upside.


Shares in Debenhams (LSE: DEB) have also made a superb start to the year and are up 25% year-to-date. As with Tesco, the department store is undergoing a transitional period, with it being squeezed in recent years by lower priced alternatives as UK consumers became much more price conscious.

However, with disposable incomes rising at a rapid rate in real terms, it is likely that consumers will begin to treat themselves much more. This could mean that they return to their former higher price and higher quality stores such as Debenhams, with the company’s top line set to rise by 17.5% over the next two years. This puts Debenhams on a forward price to sales (P/S) ratio of just 0.4, which screams ‘value for money’ and means it appears to be well-worth buying.


M&S (LSE: MKS) (NASDAQOTH: MAKSY.US) remains a firm favourite with shoppers even during more challenging periods, with its performance in recent years having been relatively strong for a mid-price point retailer. Of course, its food division has outperformed its clothing arm, but this could change moving forward as the company begins to benefit from a slicker supply chain and a more appealing website.

Indeed, the turnaround plan initiated by CEO, Marc Bolland, a number of years ago was bound to take time to implement. After all, M&S was behind the curve in terms of its store layout, supply chain and digital approach and major changes such as these take time to implement. However, the company is now making excellent progress and, with its bottom line set to rise by 8% in each of the next two years, now could be a great time to buy it.

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Peter Stephens owns shares of Debenhams, Marks & Spencer Group, and Tesco. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.