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2 top FTSE 100 retail stocks I’d buy now

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With customers of physical stores forced online by Covid-19, my interest in these two top FTSE 100 retail stocks — which are making the most of the online shift — is growing. 

When I saw the recent results of retailer Superdry, I wanted to find more long-term buy-and-hold opportunities in the clothing retail sector. I looked at JD Sports (LSE: JD) and Next (LSE: NXT)

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JD Sports Fashion

When it comes to British leaders in sports fashion, JD Sports is up there. This FTSE 100 retail stock has been — like the rest of the retail sector globally — undergoing a significant shift to omnichannel, while its share price has jumped almost 70% in the past year, from 539p to 916p.

Impressively, despite the widespread closure of its physical locations, JD Sports made an enviable pre-tax profit of £421.3m in 2020 — down just 5% year-on-year (YoY). What’s more, rapid e-commerce growth helped overall revenue increase 1% YoY to £6.16bn. 

I am very excited by the prospect of store reopenings, which should further boost JD Sports’ income stream. The FTSE 100 member has already proven that it can be a dual-front e-commerce/brick-and-mortar revenue-generating machine. This could grow even more thanks to international growth, with 55% of total sales now coming from both mainland Europe and the US.  

A couple of things concern me though. The sports fashion industry is hugely competitive, and in order to expand internationally, as it has been doing, it will need to spend more money. This could lead to overstretched resources if JD is not careful. Another concern is the rumours that long-time executive chairman/CEO Peter Cowgill may be stepping down from day-to-day control and handing over to a new CEO. This could cause some short-term volatility as is common following upper management shake-ups.

I’m still very bullish on this retailer, and at around 916p now, I believe it still has some runway for growth as the economy reopens. 

Next

Considered to be one of the top UK reopening stocks to buy, the Next share price is on the rise. In the past year, the British retail firm has risen more than 70% from 4,796p to 8,320p. 

This top FTSE 100 retailer, like JD Sports, fared well in 2020, despite the pandemic. While its stores were closed, online sales surged, which saw revenue fall just 17% from £4.27bn to £3.53bn. What’s more, it managed to retain a pre-tax profit of £342m, despite increased Covid-19 costs. 

Next’s management’s bullish forecast for the coming year. It recently raised its central guidance for a full-year profit before tax by £20m to £720m. In fact, according to its first-quarter results, Next is already back to pre-pandemic levels of business, with a comprehensive expansion policy in place. This includes standalone premium beauty stores, deals with Laura Ashley and Victoria’s secret, more third-party brands added to its Label offer, and growing its e-commerce solution for external businesses.

Much like JD though, Next operates in a massively competitive market. It will need to invest heavily in its marketing and online retail just to stay ahead of the competition, all of which will impact its ability to generate meaningful profits.  

I am still bullish about Next though, and its brand power, which has seen it rise to the top of its market and remain in the FTSE 100.

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Jamie Adams holds no position in any companies mentioned above. The Motley Fool UK owns shares of Next. 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.

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