The US tech sell-off has created a broad market panic overseas. In the first few weeks of 2022, big global indexes, including the FTSE 100, were forced into the red zone after news that the US Federal Reserve could increase interest rates to combat inflation. As Wall Street awaits the Fed’s guidance on interest rates, the tech-heavy NASDAQ index fell nearly 11% in January.
As we rip off the lockdown bandaid, the economic damage caused by a near two-year shutdown is evident. I think last week’s pullback was an expected market move given the unchecked tech stock explosion during the pandemic. The next few months could be a good time to study market recovery patterns. And I am tempted to look at UK stocks in established industries that I sidelined during the pandemic. Here are two FTSE 100 shares on my watchlist that I think could benefit in the coming months.
Retail boom in 2022?
I think 2022 could be great for retail. Foot traffic in malls and British high streets is expected to overtake pre-pandemic levels and athleisure brand JD Sports (LSE:JD) could benefit from the bounce back.
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JD Sports’s expansion efforts into North America during the pandemic has been fruitful. Improved sales during the 22-week period up to 1 January 2022 has prompted the board to raise profit expectations for the current fiscal year by 17% to £875m. The company also expanded its e-commerce presence through a partnership with Clipper Logistics. In the first-half (H1) of 2021, the JD Sports recorded revenue of £3.9bn. Profit before tax jumped a whopping 769% to £365m from £42m in H1 2020.
However, the US expansion also means fending off competition from direct retail chains of brands like Adidas, Puma, and Nike. In 2022 alone, the JD share price is down 14.1% after the Competition and Markets Authority (CMA) ruled that JD would have to sell rival Footasylum, which it acquired for £90m in 2019.
But the sports fashion retailer still looks like a great alternative to inflated tech stocks for my portfolio. And given that the latest Covid-19 variant is not as deadly, other sectors are already bouncing back. I think the sneaker subculture is becoming a global phenomenon that JD Sports can cash in on in the coming decade.
Luxury retail is here to stay
Global luxury retail made a huge comeback in 2021. Despite inflation concerns, shoppers splurged on designer products in record numbers, bringing the global luxury goods market to US$309bn at a compound annual growth rate of 5.4%. And analysts expect revenue in 2022 to cross $340bn. This is why British luxury brand Burberry (LSE:BRBY) is on top of my FTSE 100 watchlist in 2022.
As of January, the company is debt-free and operates with a huge 20%+ profit margin on its retail goods. The company has grown its brand image over the last decade through strategic marketing and has become a fashion staple.
However, I expect some changes to the Burberry product line after new CEO Jonathan Akeroyd takes over in April. A change in leadership is often a cumbersome process that could affect the brand’s performance in the short term.
But I am buoyed by how well luxury goods have bounced back from the pandemic and FTSE 100 heavyweight Burberry looks like an attractive recovery option for me right now. I am watching the brand closely and would consider an investment if revenue figures increase further.
