Interactive Investor

Retail shares to watch this Black Friday

27th November 2015 11:42

Lee Wild from interactive investor

It's Black Friday! Time to dust down the credit card and get spending. This awful American post-Thanksgiving tradition has caught on here over the past few years, and is now the starting gun for Christmas shopping season. Warehouses the size of a small market town will ship out millions of pounds' worth of TVs, laptops, electronic gizmos, books and stuff over the next few days.

Of course, retailers will make millions from it, but many are uncomfortable slashing prices this early in the season. In the old days - before the recession - there'd be a few sales, but most shops wanted to sell as much stock at full price before trumpeting big sales on Boxing Day and the run-up to New Year.

A study commissioned by Nationwide estimates that the average shopper will spend £176 this Friday, with £120 million being racked up on debit cards. That's more than on 19 December, the last payday before Christmas, which has, historically, triggered a fresh wave of spending. So this US import is causing problems.

True, the FTSE 350 Retail index is up 6% over the past 12 months versus the FTSE All-Share down 3%, but it's lagged the broader index over the past three weeks, losing 4% compared with a flat All-Share. And there is obvious uncertainty about how this year's sales will play out.

Christmas trading 'less predictable'

Less than six weeks ago, Argos-owner Home Retail warned that trading during the Christmas season is "less predictable than usual". Last year, Black Friday triggered a sharp drop in trade at the catalogue business in the weeks after, and chiefs now think profits for 2015 will be below the bottom end of the expectations of £115-£140 million. Talk of a £1 billion bid has surfaced in the aftermath.

Online electricals retailer AO World has had a nightmare since floating last year, and its share price has halved from its 285p IPO price. Heavy investment in its German business turned a £0.9 million operating profit into an £8.9 million loss in the six months to September, but chief executive John Roberts says things picked up in the second quarter and the second half has started well.

Black Friday sales figures will soon begin trickling out, and it will come as no surprise to hear that some retailers had a record day. According to Visa, Brits will increase Black Friday spending to almost £2 billion - but not all will cope well with the surge in demand.

Here are the shares to watch this Black Friday:

(click to enlarge)

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.