High streets are getting busier and online shopping continues to boom. In the run-up to the end of the year, retail will see some of its busiest trading weeks. With that in mind, what retailing shares could I add to my own shopping list? With £3,000 to invest, I see the three below as UK shares to buy now for my portfolio.
Value retailer: B&M
Value retailer B&M (LSE: BME) is well-known for selling things cheap — and I reckon that includes its shares. They have risen 17% over the past year, at the time of writing this article earlier today.
But the shares have fallen today after announcing it would be tapping the debt markets for £250m. I see that as a buying opportunity for these UK shares, as I reckon the company has a strong outlook. In its interim results last week, B&M reported that revenues grew even compared to the very strong equivalent period last year. The growth was only 1.2%, but compared to the pre-pandemic 2019 first half they were up 26.8%. Diluted earnings per share also edged up slightly over last year’s first half. The interim dividend grew 16.3%.
I think the strong results demonstrate the enduring appeal of B&M’s retail empire. One risk is adding too much debt to the balance sheet. If interest payments are too large, that could reduce the company’s ability to pay dividends.
Global expansion: JD Sports
Another retailer I would consider for my portfolio is JD Sports (LSE: JD). I think, the company, like B&M, has established a successful retail strategy that it can roll out more widely in coming years.
The first half was the company’s strongest ever. It has ridden out the pandemic and continued to focus on growing in overseas markets including the US. I like the company’s wide product offering, its ability to respond to shifting customer tastes and its footprint in both digital and physical retail.
The shares have added 42% over the past year, at the time of writing this article earlier today. Clearly, I am not the only investor to consider these UK shares as attractive. But even at the current JD Sports share price, I would consider buying the company for my portfolio. I see strong continued growth opportunities. One risk is that moving into competitive overseas markets could lead to profit margin dilution.
Shares to buy now: Next
Another retailer currently trading fairly close to its all-time highs is Next (LSE: NXT). But I would still consider buying the shares as I reckon this long-standing star performer among UK retailers has further to run in coming years.
Like JD, it has turned the threat of online commerce to its advantage. Its own brand continues to perform strongly and it provides electronic commerce services to other companies. While physical retail sales fell 6.1% in the third quarter, online sales grew 40%. The company is forecasting earnings per share for the full year of £5.17. That means the prospective price-to-earnings ratio at Next is 16. I don’t think that is expensive for a company of its proven quality. One risk is revenues and earnings being hurt by stock availability problems. While the company said the situation has improved, it noted that it “remains challenging”.
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Christopher Ruane has no position in any shares mentioned. The Motley Fool UK has recommended B&M European Value. 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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