5th February 2016
Valentine’s Day is nearly upon us and consumers are set to splash out £86 million on gifts; here are the stocks that will profit from romance.
According to dating website eHarmony.co.uk an estimated £86 million will be spent on the Saturday before Valentine’s Day, and is being dubbed ‘Red Saturday’ in the style of ‘Black Friday’ or ‘Cyber Monday’.
Around 2.2 million people will be organising dates, booking restaurants and buying gifts for their loved ones and Ian Forrest, investment research analyst at The Share Centre, has pinpointed three companies that could benefit.
Marks & Spencer
Couples choosing to dine in rather than shell out at restaurants will provide a boost for retailers like the high street stalwart Marks & Spencer.
‘The company is renowned for its treasured meal deal at this time of year in which couples can indulge in a three course dinner, including a bottle of bubbly and chocolates from the comfort of their own home,’ said Forrest.
‘Perfect for those with young families and those that can’t stretch to a night out. Furthermore, the group will be stocking its shelves with an array of bouquets and gifts to tempt people into forking out a little extra as they collect their food goodies.’
He added that investors ‘should appreciate that food sales remain a major contributing factor to overall revenue for Marks & Spencer and increases have been helped by the launch of 1,700 new food lines in the last year’.
‘The group’s plan to transform the business into an international, multi-channel retailer is progressing well, supported by the recent launch of four international websites in Germany, Spain, Austria and Belgium,’ said Forrest.
‘The significant potential to increase profitability in general merchandise and the healthy dividend should all be supportive of results ahead. Rising disposable incomes, boosted by wage rises and the falling oil price, may also provide a stimulus for sales. Subsequently, we recommend Marks & Spencer as a ‘buy’ for medium risk investors seeking a mixture of income and growth.’
For those who are braving restaurants this Valentine’s could be visiting one of the 450 outlets operated by Restaurant Group, which owns Frankie & Benny’s, Chiquito, Garfunkel’s and Home Counties.
‘The group is likely to benefit in the run up to Valentine’s Day as lovebirds make plans for that all-important date night. The company focuses on locations near to cinemas so it is likely to be enticing couples to end, or even start, their evening with a good deal at one of their establishments. Investors should also appreciate that the group often has more than one restaurant in operation at the same site, thus limiting competition,’ said Forrest.
‘This is a company that might not be to everybody’s taste, but there is no denying the popularity of the group’s offerings, especially amongst younger people. With management still seeing plenty of opportunities to grow the estate further, shareholders could benefit from both a recovering share price and the 25% discount that they get at the restaurants.’
Forrest recommended the company as a ‘buy’ ‘for medium to high-risk investors seeking long-term growth. It is worth noting that a trading update in January led to a significant fall in the share price so at present we would suggest drip-feeding into the shares’.
Forrest said ‘secret admirers are likely to be using online companies such as Findel to send a gift of love to their unsuspecting sweethearts this Valentine’s Day to create that element of surprise’.
This multi-channel retailer trades across two areas, Express Gifts and Education, offering products such as gifts and greetings cards.
‘Investors should acknowledge that despite the group reporting a slowdown in sales growth at the Express Gifts business in January, this is expected to be a short-term issue. The market was in fact cheered a few days later by the announcement that the struggling Kitbag business had been sold to US sports merchandise group Fanatics for £11.6 million,’ he said.
‘While a lot of work has been done to stabilise Findel there is still a lot more to do and as a result, we continue to recommend the group as a ‘buy’ for higher risk investors seeking growth. This is mainly due to the potential for further growth at the Express Gifts business, the possible resumption of dividends, and the fact that the valuation does not reflect its potential. This is a relatively new management with a credible track record and given the high level of risk and mixed trading performance, we advise investors to drip-feed into the shares.’