2 retail stocks to buy ahead of Christmas shopping boom

Highlights 

  • The pandemic has been instrumental in changing not only what people consume but also how they consume it.
  • Tesco’s board announced an interim dividend of 3.20 pence per share to shareholders.
  • Morrisons’ total revenue, including fuel for H1 ended 1 August 2021, was £9.05 billion compared to £8.73 billion in H1 2020, up by 3.7% year-on-year.

Rising vaccination rates and relaxation of COVID-19 related restrictions have been fuelling the return of people to stores and high streets. The pandemic had been pivotal in putting e-commerce into overdrive. Several retailers stepped up their e-commerce operations to address the growing demand. Investors interested in gaining a regular return on their investments can choose retail stocks due to the essential nature of the sector.

The pandemic has been instrumental in changing not only what people consume but also how they consume it. For success in retail stock investment, investors need to keep a close watch on these changes while ensuring these stocks are backed by strong fundamentals. Below is a detailed review of the investment prospect in two FTSE 100 listed retail stocks – Tesco and Morrisons.

Tesco & Morrisons: One year return & Market capitalisation

(Data source: Refinitiv)

Tesco Plc (LON: TSCO)

Tesco is an FTSE 100 listed UK-based general merchandise and groceries retailer. The company launched its first “just walk out” GetGo store in Central London, which allows visitors to purchase groceries without having to scan items or visit a billing counter. The launch was a part of the company’s strategy to compete with AmazonGo stores.

The shares of Tesco last traded at GBX 269.50, up by 0.60% on Monday 18 October 2021. The market capitalisation of the company stands at £20,713.25 million. The shares of Tesco returned 25.76% to shareholders in the last one year.

For H1 2021/22, Tesco group’s sales stood at £27.3 billion compared to £26.7 billion in H1 2020/21, representing an increase of 2.6% year-on-year. It recorded adjusted operating profit from retail operations at £1.4 billion in H1 2021/22 compared to £1.2 billion in H1 2020/21, up by 16.3% year-on-year.

Tesco’s board announced an interim dividend of 3.20 pence per share to shareholders.

Morrison (Wm) Supermarkets Plc (LON: MRW)

Morrisons is FTSE 100 listed supermarket chain in the UK. Recently, the company accepted the acquisition offer by Clayton, Dubilier & Rice (CD&R), a US private equity group, for £7 billion ($9.5 billion).

The shares of Morrisons last traded at GBX 285.30, down by 0.04% on Monday 18 October 2021. The market capitalisation of the company stands at £6,905.40 million. The shares of Morrisons returned 65.01% to shareholders in the last one year.

Morrisons’ total revenue, including fuel for H1 ended 1 August 2021, was £9.05 billion compared to £8.73 billion in H1 2020, up by 3.7% year-on-year. Its adjusted profit before tax was £93 million in H1 2021 compared to £74 million in H1 2020, representing an increase of 41.9% year-on-year.

Bottomline

Retailers are modifying their offerings as per consumer demands to stay relevant. For instance, they stepped up online retail operations when COVID-19 related restrictions were in place, and people preferred staying at home. As the economy reopens, retailers are modifying setups as well,  such as launching on-the-go stores that would not require shoppers to wait in long queues at the billing counters.

Comment


Disclaimer