The outlooks for shares in Next plc (LON:NXT) (NXT.L), Tesco PLC (LON:TSCO) (TSCO.L), J Sainsbury plc (LON:SBRY) (SBRY.L) and Boohoo Group PLC (LON:BOO) (BOO.L) may seem to be challenging at the moment. Consumer confidence is weak, and Brexit uncertainty may lie ahead. However, could they deliver improving share price performance over the long run?
Next’s update released yesterday showed that the company is delivering resilient performance in tough operating conditions. It was able to post positive sales growth in spite of weak trading conditions, with a strong lead up to Christmas helping to offset a weak November performance.
With Next’s shares trading on a P/E ratio which is barely in the double digits, I feel that they could offer good value for money. With what seems to be a sound strategy, I’m optimistic about the FTSE 100 company’s investment potential.
Tesco also appears to have a sound strategy in my opinion. The company is focusing on efficiency and customer service, which has produced a period of strong sales growth. Its EPS growth is expected to be in the double digits over the next two years, which puts it on a PEG ratio of around 0.8.
With Tesco having agreed a supply arrangement with Carrefour, it may be able to benefit from an increasing competitive advantage versus peers. The prospect of an increasing margin may also boost investor sentiment towards the stock.
Sainsbury’s acquisition of Asda could transform the company’s fortunes in my view. It may provide it with synergies and cost advantages versus peers at a time when efficiency could become an increasingly important factor across what remains a highly competitive supermarket sector.
With Sainsbury’s also benefitting from cross-selling opportunities following the purchase of Argos, I think that the company could deliver improving financial performance over the long run.
The Boohoo share price has been highly volatile in recent months, with poor financial performance from sector peers seeming to weigh on investor sentiment.
While there could be further uncertainty ahead for the stock, I think that Boohoo may continue to benefit from its online presence as shoppers move away from bricks-and-mortar retailers. With a continued focus on innovation, cost and service, I’m optimistic about the prospect of EPS growth in future years.