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UK Stocks: 2 FTSE Retail Stocks to Buy in February and 2 Stocks to Avoid

UK Stocks: 2 FTSE Retail Stocks to Buy in February and 2 Stocks to Avoid


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Towards the end of January, FTSE retailers reported quarterly results. That group had a few winners and losers. I picked two UK stocks that I thought were worth buying, and two others to avoid in February.

1. Marks and Spencer

Marks and Spencer (LSE:MKS) was on my shopping list last quarter as the top grocery listed on the FTSE. The hybrid retailer recorded an excellent quarter, beating giants Tesco and Sainsbury’s, boasting the best food and apparel sales growth. This has expanded its market share on both fronts. And with plans to accelerate store rotation plans, the FTSE 250 group has ample potential for further growth.

M&S is also slowly improving its balance sheet position and paying down its debt. When paired with a cheap valuation multiple, you’ll likely want to buy more stocks in the future.

MetricsMarks and SpencerIndustry Average Price-to-Earnings Ratio9.414.2Price-to-Sales(P/S) Ratio0.30.3Price-to-Book(P/B) Ratio0.91.4Price-to-Earnings Growth (PEG) ) ratio0.10.1 Data source: YCharts, Simply Wall St 2. Dunelm

The doom and gloom surrounding home improvement stocks has dissipated over the past few months as the numbers demonstrate resilience. Dunelm (LSE:DNLM) once again proved the doubters wrong with another strong trading update. So it’s no surprise that the stock is up a whopping 60% from its September bottom.

The company reported expected margin declines, but it all seems meaningless when other, more meaningful metrics provide better numbers. Last quarter, sales increased by 18% and 48% from pre-pandemic levels. Moreover, the board currently expects pre-tax annual earnings to be in the range of 131 million to 186 million, above the analyst consensus.

3. Dr. Martens

On the other hand, Dr Martens (LSE:DOCS) is getting the boots from me. With the stock already down 30% this year, it’s not hard to understand why.

Shoemaker’s latest update was full of bad news. Supply chain issues related to bottlenecks at the new distribution center in Los Angeles are the culprit. As a result, the company now expects weak US sales this year.

As a result, profits are now expected to decline significantly. Wholesale revenue could take a hit between $15 million and $25 million, while EBITDA would lose about $16 million to $25 million, including $8 million to $11 million in supply chain costs.

4. Naked wine

Naked Wines (LSE:WINE) are also being avoided. Pandemic preference has fallen since Covid restrictions were lifted, prompting management to change direction from a ‘grow at all costs’ model. This was recently translated into a sweet update. The company has reported somewhat optimistic numbers for recent quarters and has updated its forecasts for better profit.

Still, we’re not sure about its long-term potential. There is certainly hope that retailers will age like fine wine. However, the share price does not rise enough to warrant the opportunity cost of investing in other UK stocks with higher upside potential.




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