The glory days of the British high street feel like they are in the distant past.
In recent years more household names have disappeared, with the likes of Debenhams, Topshop, Wilko and Ted Baker seeing their stores close down.
The continuing shift away from the high street has been triggered by a number of factors, with online shopping playing a major part and leading to a new generation of digital retailers becoming investor favourites.
But investing experts say stock pickers shouldn’t just look to online darlings and a number of bricks and mortar stalwarts have rebounded while names like Asos and Boohoo have struggled.
In decline: An increasing number of high street shops have been shutting their doors in recent years but some big names are doing well
Unsurprisingly, with Britons stuck at home over lockdowns, the Covid pandemic proved a major catalyst in the high street’s downturn. Enforced time at home and the convenience of online shopping won over even the most ardent of high street shoppers.
But as the pandemic online boom faded, a number of big name British high street and retail stocks have proven their ability to adapt and profit from their unique offerings.
While some have fallen by the wayside, others have flourished, showing that there is life in physical retailing yet.
Although prospects may remain robust, not all have 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.
‘Yet, the high street has endured, demonstrating a persistent demand for physical retail.
‘Despite many high street stocks successfully adapting to the evolving retail market, valuations remain depressed – presenting a value opportunity for some UK fund managers as consumer sentiment improves.’
One area in which high street continue to do well is where the in-person experience can’t be replicated online.
Brendan Gulston, co-manager of the WS Gresham House UK Multi Cap Income Fund, said: ‘Certain pockets have been well insulated and delivered strong operational performance, such as companies on the right side of structural growth drivers or those with resilient propositions and defensive characteristics.’
Gulston points to Ten Entertainment and Hollywood Bowl, the former of which was acquired by private equity firm Trive Capital Partners in January, while the latter has seen shares rise more than 32 per cent over the past year.
Gulston said: ‘Within structural growth areas, low ticket experiential leisure has been a category winner, taking wallet share from other business models.’
Similarly, the outlook for food-based businesses remains positive, with bakery chain Greggs having risen 29 per cent over the past 12 months.
Greggs has gone from strength to strength over recent years, swiftly shaking off the pandemic dent to business.
The Newcastle-based group, known for its sausage rolls, saw its sales reach £960.6million first half of 2024, growing from £844.0million a year ago.
McDermott said: ‘Greggs has transformed from a local favourite to a national success story, thanks to effective marketing, innovative ‘value-for-money’ products, and an understanding of evolving consumer preferences.’
Supermarkets have also benefitted recently after years in the doldrums.
Tesco has reasserted its position at the top of the food shopping chain and seen its shares gain 35 per cent over the past year. Yet, at 360p, they are up just 15 per cent over five years and well below their mid to late 2000s peak, when the stock mainly traded above 500p.
Sainsbury’s shares have lagged Tesco’s recent rise but it too is making progress. 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 a struggling Asda. Over the past five years, the firm’s shares have gained 35 per cent.
The real high street rebound story of recent times has been Marks and Spencer, however. A revived clothing offering that has gained real traction in recent seasons has combined with its strong food performance.
M&S revealed in May that its annual profits were up 41 per cent and Marks & Spencer shares have rocketed 59 per cent over the past year and at 376p they have quadrupled in two years, since their 94p low in October 2022.
A less fashionable stock but one benefitting from selling to high street food retailers is St Albans-based Premier Foods. Gulston says it has, ‘delivered strong earnings growth through market-leading brand strength, pricing power, targeted growth through innovation and use of consumer trend data, and other operational efficiency drivers.’
Premier Foods is up by 57 per cent year-on-year and has more than quadrupled in value over the past five years, having started to recover from some disastrous years before that.
After the cost of living spike hit household incomes hard, inflation has eased back to close to the 2 per cent target. This doesn’t mean life has got any cheaper but price rises have slowed and consumers have proved more resilient than many thought.
McDermott said: ‘The UK consumer outlook isn’t as pessimistic as some would think. The deceleration in inflation, complimented by strong income growth, is likely to boost financial sentiment among households, which in turn could provide a lift to UK retail stocks.’
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