With Brexit now less than three months away, I’m considering whether it could have an impact on retail shares J Sainsbury plc (LON:SBRY) (SBRY.L), Next plc (LON:NXT) (NXT.L), Boohoo Group PLC (LON:BOO) (BOO.L) and Ocado Group PLC (LON:OCDO) (OCDO.L).
As a UK-focused retailer, Sainsbury’s could continue to be impacted by weak consumer confidence in my view. This may increase to some degree over future months as the Brexit process moves ahead.
However, with Sainsbury’s merging with Asda, I believe that the combined company could have an increased competitive advantage versus sector peers. This could provide it with a stronger position through which to generate EPS growth.
Next’s UK operations dominate its overall sales, but it has thus far been able to deliver impressive sales growth at a time when some of its industry peers have experienced challenges. It has a history of doing so according to my research, with it having an adaptable business model.
With Next expected to continue to invest in its supply chain and website, its omnichannel capabilities are set to improve. With a P/E ratio of around 11, I think that the FTSE 100 company offers good value for money at the moment.
Boohoo’s international exposure may help to diversify its sales at a time when the prospects for the UK economy are relatively uncertain.
The company is also in the process of refreshing its management team, and this could provide it with a stronger growth strategy over the long run in my view. Since Boohoo has a track record of growth and it continues to focus on service, innovation and price, I feel optimistic about its long-term investment capabilities.
Ocado’s focus on online shopping could allow it to benefit from a continued tailwind over the medium term. Consumers are increasingly moving online for a variety of products, including groceries.
Although I’m concerned about the company’s lack of profitability, I feel that Ocado’s technology could put it in a strong position as it helps major retailers to gain an online presence. With sales growth set to be recorded in future, I’m optimistic about its share price prospects relative to the wider retail sector.