I know that this headline for UK shares can sound contradictory when the broad indexes are falling.
In February, it was clear that the stock market rally had all but stalled. The FTSE all-share and FTSE 100 indexes, on average, were lower in February compared to the month before. The FTSE 250 fared better, but the party is slowing down for it too.
But what is true for the overall index is not true for all UK shares.
Consider Card Factory
A case in point is Card Factory (CARD), the greeting card and gifts retailer, whose share price is up 20% as I write. I wrote about it last week. But the latest increase is so big, this UK share had to be mentioned again. This is particularly so because I think it shows the potential for UK shares of retail companies for 2021.
Retail has suffered during the lockdowns, but things are improving. Soon retailers will be able to open shop. Hopefully this will also come with with less social-distancing precautions, as more and more people get vaccinated.
Based on this, aside from CARD, I can think of at least four other retailers that will benefit. And going by the latest share price increase for CARD, I think they could actually double my money in 2021.
Strong market for home goods and pets
One of them is the home-goods and grocery retailer, B&M, whose shares have done very well in 2020 owing to its strong performance. With a price-to-earnings (P/E) ratio at around 20 times, I think this UK share can do even better.
Another UK share to consider is the retailer Pets at Home. As the name suggests, it is a speciality retailer that sells pet products like food, toys, and accessories. It too has done quite well in 2020.
In its last trading update in January, it said that its performance was “ahead of expectations” despite the challenges related to Covid-19. It is poised to do even better.
FTSE 100 UK shares show robust increases
I am also looking closely at two FTSE 100 retailers — JD Sports Fashion and Burberry — whose share prices bounced back despite the challenges of 2020.
I think 2021 will be good for them as retail stores open, but they are great stocks to hold for the long term. JD Sports Fashion is growing share in the popular athleisure market. Burberry is an iconic luxury-fashion brand. Notably it is popular with in China, probably the fastest growing consumer consumer market.
Risks to UK shares
I do think, however, that it is necessary to look at the risks to retailers too. We still have coronavirus variants to worry about. As per media reports, the AstraZeneca-University of Oxford vaccine is not effective on them.
There is also the economic slowdown underway. We will know its full effects only later in the year, when things return to normal. If there is a severe slowdown, non-essential retail spending could be hard hit.
The take away
So far, I see more positives than concerns. I think UK shares of retailers can do well in 2021.
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Manika Premsingh owns shares of Burberry and JD Sports Fashion. The Motley Fool UK has recommended B&M European Value, Burberry, and Card Factory. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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