When I look at the business environment right now, I see global retail markets opening up. Fuelled by vaccination efforts, people are returning to malls and stores again and this means one thing to me — a retail boom.
Even though the pandemic put e-commerce into overdrive, I believe that store shopping retains its charm. Retail stocks reflect this and are surging despite fears of a market crash. I have earmarked these two FTSE 100 retail stocks as possibilities for my portfolio. I think they could benefit from the return of foot traffic to stores.
British luxury retailer
Fashion retailer Burberry (LSE: BRBY) has been on a turbulent run in the market. The recent news of China’s wealth distribution efforts have raised concerns about the spending potential of the wealthy in the country. But I think the market is overreacting. Here’s why.
China’s luxury goods market is estimated to be $52.2bn and is second only to the US. The Asian market’s spending potential is growing every year. I think this news will just be a minor blip, and analysts agree with me. Predictions show that China’s luxury goods market could become the world’s biggest by 2025, and FTSE 100 retailer Burberry could benefit greatly from this.
Despite the falling share price, Burberry’s first-quarter (Q1) 2022 financials looked excellent to me. Retail revenue was £479m, up 86% from the same period in 2021. Store sales rebounded by 90% and the company expects its wholesale sales to grow 60% in the first half of 2022 as well.
However, investor sentiment has been impacted by China’s crackdown and could prove detrimental in the short term. But, with 459 stores worldwide, I expect the iconic British luxury fashion brand to benefit from the return of tourism and retail traffic. Despite the risk of further share price drops, I have been watching this FTSE 100 retailer for a while and think it is an excellent buy for my long-term portfolio right now.
Sports fashion giant
JD Sports Fashion (LSE: JD) is another retailer that has been on my radar for quite some time. Its share price exploded recently after the company released its excellent first-half (H1) results. Profit before tax for the period was £364.6m, up a whopping 754% from H1 2020.
I had written about JD Sports’ acquisition strategy in August and its investments in the US have proven fruitful. The FTSE 100 retailer acquired over 500 stores in the region via multimillion-dollar deals with DLTR Villa and Shoe Palace. Total profit before tax in the US was £245m, up from £73.4m in 2020. The recent acquisitions contributed £72.9m, reinforcing my faith in the company’s business strategy.
The company has signed a deal with Clipper Logistics, which strengthens its thriving e-commerce presence. I see this as a huge positive after the pandemic-driven online retail surge. Although the sports fashion industry is ruled by giants like Nike and Adidas, I think JD Sports is carving a nice little niche.
Combining online retail with an aggressive expansion of brick and mortar stores in North America looks to me like a winning strategy. The market has reacted positively to its latest results with share prices up 10.2% in the last month. The company definitely keeps its spot on my list of FTSE 100 retail stocks to buy.
