In a research note warning of a ‘difficult Christmas’ for the retailer sector, investment bank Investec notes the sector nonetheless contains some ‘interesting valuations’. It identifies stocks to appeal to most investment styles while highlighting its top 2018 picks.

In Investec’s view, the coming 12 months is ‘set to be another difficult year for most retailers’, traditional brick and mortar operators having to profitably adapt store portfolios and increase the flexibility of their business models as shopping continues to migrate online.

More promisingly, the analyst team also points out the gradual unwinding of inflation is likely to see real wage growth return in the first half of the year. ‘There is also potential for easing input cost pressure,’ it says.

‘The sector contains some interesting valuations, with an increasing risk to being underweight the sector in our view. As always, stock picking remains key,’ says Investec.

Its 2018 picks include growth stocks with upside risk to forecasts, namely JD Sports Fashion (JD.), ‘a play on the growing athleisure sector’, Superdry brand owner SuperGroup (SGP) and international multi-brand online growth story Boohoo.com (BOO:AIM).

Investec’s other picks are preferred value stories with attractive yields in the form of car parts-to-bicycles seller Halfords (HFD) and N Brown (BWNG), ‘a recovery story focused on the growing, fragmented plus-size market.’ (JC)

Christmas trading reporting calendar

03 Jan 2018 – Next

09 Jan 2018 – Morrisons, Majestic Wine

10 Jan 2018 – Sainsbury’s, Ted Baker, Gear4music

11 Jan 2018 – Tesco, Marks & Spencer, Boohoo.com, Debenhams

12 Jan 2018 – B&M European Value Retail

16 Jan 2018 – JD Sports Fashion

18 Jan 2018 – Halfords, N Brown, ASOS

23 Jan 2018 – Dixons Carphone

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