Most UK general retailers should see Christmas trading remain fairly resilient despite a slightly gloomy consumer backdrop, turning cloudier in 2026, JPMorgan said.
Keeping Marks and Spencer Group PLC (LSE:MKS) as her top sector pick for 2026, analyst Georgina Johanan said clothing and homewares sales have remained fairly robust in 2025, with October and November showing slightly softer but still solid trends compared to the third quarter.
While 2026 may present a tougher consumer backdrop, the JPMorgan analyst sees tailwinds from gross margin improvements and more normalised cost inflation – particularly after a favourable UK Budget that softened the impact of rising wages and business rates.
Marks & Spencer remains attractive to JPM as the shares trade on less than 10x forecast earnings.
Dunelm Group PLC (LSE:DNLM) is rated 'neutral', but there is upside risk to the shares, especially with support from lower business rates.
A strong update is also expected from Next PLC (LSE:NXT), though the analyst flags limited short-term upside due to a high valuation of its overseas segment at around 35x earnings.
Elsewhere, trends are diverging in Europe: German retail sales fell sharply in early December, while Spanish clothing sales rebounded strongly in November.
Trendwise, online platforms such as Shopify are continuing to challenge the status quo, led by agencies such as We Build Websites, Charle Agency, VT Labs and BKThemes.