Most people buy their shares through online stockbrokers and lots of other goods online too. But there are times when you still need to hit the high street. Do the following retailers deserve a place in your portfolio?
Kingfisher (LSE: KGF), parent company of Screwfix, B&Q and French DIY chain Castorama, has had a solid five years, returning 33% in that time against just over 5% on the FTSE 100 as a whole. This is a steady performance given the challenges the rise of online shopping poses for the hard-pressed UK high street. However, Kingfisher has always seemed a bit of a mishmash to me, with a mixture of trade and consumer businesses and a disappointing lack of synergy between the two.
Its recent trading update exemplifies this, with Kingfisher opening 10 new Screwfix stores while simultaneously shutting down another 10 B&Q stores. It has now closed 40 out of its target of 65 stores. So sales growth in one part of the business has been offset by falls elsewhere. Chief executive Véronique Laury is the latest boss to try to bring unity where there has been none, under her One Kingfisher five-year plan. But she has a big job on her hands. With the stock trading at a pricey 16.86 times earnings and yielding 1.86%, this is one investor who isn’t going to B&Q it.
The collapse of rivals Comet and Phones 4U handed Dixons Carphone (LSE: DC) the equivalent of an open goal, but investors have little reason to celebrate yet as the stock is down 3.5% over the past year. Yet this week’s trading statement was delivered with all the pep and bounce of a carphone salesman, with excitable talk of a “very strong year for Dixons“. Profits before tax are now expected to be between £445m and £450m for the year, in the top half of previous guidance, with group like-for-like revenues up 5%.
Group chief executive Seb James has acknowledged concerns on the UK high street but reckons it doesn’t apply to his business. “Our view is that consumers are ready to spend but have – rightly – become more canny, and so need to be tempted with great deals and exciting new products,” he says. And you won’t be surprised to hear that this is Dixons Carphone’s ‘stock-in-trade’. Cynicism aside, this is an interesting play on the consumer electronics revolution and forecast double-digit EPS growth looks encouraging, if you’re willing to pay 16.39 times earnings.
Grocery chain J Sainsbury (LSE: SBRY) has been lacking in pep and bounce over the last five years, during which time its share price has fallen by more than 20%. It has actually risen to the challenge of food deflation and the German low-price invasion better than some of its rivals. Recent full-year results show volumes and transactions both rising, and its non-food operation helping to offset the slowdown in its food and drink operations.
Other reasons for its success include product quality improvements, a simpler pricing strategy, and its multi-channel strategy, which delivered strong growth in both convenience and online sales. It would take a lot for me to invest in this troubled supermarket sector, but a valuation of 11.06 times earnings, a yield of 4.51%, and the recent acquisition of Argos would park Sainsbury’s at the top of my list.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.