Table of Contents
The glory days of the British high street seem to be in the distant past.
More household names have disappeared in recent years, with companies such as Debenhams, Topshop, Wilko and Ted Baker seeing their stores close.
The continued move away from the high street has been brought about by a number of factors, with online shopping playing a major role and leading to a new generation of digital retailers becoming investor favourites.
But investment experts say stock pickers shouldn’t just look at online favorites and a number of brick-and-mortar stalwarts have rallied, while names like Asos and Boohoo have had problems.
In decline: An increasing number of high street shops have been closing their doors in recent years, but some big names are doing well
Unsurprisingly, with Brits stuck at home due to lockdowns, the Covid pandemic proved to be a major catalyst in the high street recession. The forced time at home and the convenience of online shopping won over even the most ardent street shoppers.
But as the pandemic online boom faded, several big-name British high street and retail stocks have demonstrated their ability to adapt and benefit from their unique offerings.
While some have fallen by the wayside, others have flourished, proving that there is still life in physical retail.
While the outlook may remain strong, not everyone has seen this fully reflected in their share prices, creating an opportunity for bargain-hunting investors.
“Many have sounded the death knell for the UK high street, especially as retail trends shifted towards online shopping during the pandemic,” Darius McDermott, managing director of FundCalibre, told This is Money.
‘However, the high street has endured, demonstrating persistent demand for physical retail.
“Despite many high street stocks having successfully adapted to developments in the retail market, valuations remain depressed, presenting a value opportunity for some UK fund managers as consumer confidence improves. “.
One area where high street continues to do well is where the in-person experience cannot be replicated online.
Brendan Gulston, co-manager of the WS Gresham House UK Multi Cap Income Fund, said: “Certain sectors have been well insulated and delivered strong operational performance, such as companies that are on the right side of structural growth drivers or those with resilient proposals and defensive strategies”. characteristics.’
Gulston points to Ten Entertainment and Hollywood Bowlthe former of which was acquired by private equity firm Trive Capital Partners in January, while shares of the latter have risen more than 32 percent over the past year.
Gulston said: “Within areas of structural growth, low-cost experiential leisure has been a category winner, taking share away from other business models.”
Similarly, the outlook for food companies remains positive, with bakery chain Greggs having increased 29 percent in the last 12 months.
Greggs has gone from strength to strength in recent years, quickly overcoming the impact of the pandemic on the business.
The Newcastle-based group, known for its sausage rolls, saw sales hit £960.6m in the first half of 2024, up from £844.0m a year ago.
McDermott said: “Greggs has gone from a local favorite to a national success story, thanks to effective marketing, innovative value-for-money products and an understanding of changing consumer preferences.”
Supermarkets have also benefited recently after years of stagnation.
tesco has reaffirmed its position at the top of the grocery chain and its shares have gained 35 percent over the past year. However, at 360p, they are up just 15 per cent in five years and are well below their peak in the mid-to-late 2000s, when the stock mainly traded above 500p.
Sainsbury’s The stock has lagged Tesco’s recent rise, but it too is moving up. Sainsbury’s has gained 19 per cent in the past year, having increased its market share to 15.3 per cent, from 14.8 per cent in recent months at the expense of struggling Asda. Over the past five years, the company’s shares have gained 35 percent.
The true story of the rebound on the street in recent times has been Marks and Spencerhowever. A revitalized clothing offering that has gained real traction in recent seasons has been combined with its strong performance in food.
M&S revealed in May that its annual profits rose 41 per cent and Marks & Spencer shares have soared 59 per cent over the past year and, to 376p, have quadrupled in two years, from their low of 94p in October of 2022.
A less fashionable stock but benefiting from sales to high street food retailers is St Albans. First class food. Gulston says it has “delivered strong profit growth through market-leading brand strength, pricing power, targeted growth through innovation and the use of consumer trend data, and other drivers of operational efficiency.”
Premier Foods is up 57 percent year-over-year and has more than quadrupled in value over the past five years, having begun to recover from some previous disastrous years.
After rising cost of living hit household incomes hard, inflation has retreated closer to the 2 percent target. This doesn’t mean life has become cheaper, but price increases have slowed and consumers have proven more resilient than many thought.
McDermott said: ‘The UK consumer outlook is not as gloomy as some might think. Slowing inflation, complemented by strong income growth, is likely to boost financial sentiment among households, which in turn could boost UK retail stocks.
DIY INVESTMENT PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-to-use portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free Fund Trading and Investment Ideas
interactive inverter
interactive inverter
Fixed fee investing from £4.99 per month
sax
sax
Get £200 back in trading fees
Trade 212
Trade 212
Free trading and no account commission
Affiliate links: If you purchase a This is Money product you may earn a commission. These offers are chosen by our editorial team as we think they are worth highlighting. This does not affect our editorial independence.
Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.