Deutsche Bank AG (NYSE:DB) has weighed in on UK retail stocks, naming its top picks after it initiated coverage of the sector for the first time.
ASOS PLC (LSE:ASC), B&M European Value Retail SA (LSE:BME) and Marks and Spencer Group PLC (LSE:MKS) are all ‘buys’ as they all have “specific and interesting investment cases”, the German bank revealed.
Dunelm Group PLC (LSE:DNLM), Kingfisher PLC (LSE:KGF) and Next PLC (LSE:NXT) have all been rated ‘hold’.
Trading in the sector has been strong over the last few months (up 25% YTD) despite supply chain woes and rampant inflation weakening operations in the earlier part of 2023.
However, the healthy uptick in sales, profits and volumes is not expected to last forever, Deutsche Bank warned.
Analysts have little confidence that strong sales and margins will persist into 2024.
This year's festive period is expected to be “the last hurrah of post-pandemic spending recovery” and many players will be ending the year in good shape with margins recovering and balance sheets standing firm.
Yet, Deutsche Bank thinks “growth [in the sector] will be anaemic”.
“Time to become more selective,” it concluded.
Deutsche Bank’s UK retail price targets:
- Asos 500p (Current price: 390p)
- B&M 660p (CP:534p)Marks & Spencer 310p (CP:252p)
- Dunelm 1045p (CP: 1,053p)
- Kingfisher 255p (CP: 229p)
- Next 7350p (CP: 7,708p)