I think it’s safe to say that Britons enjoyed last week. Easing lockdown restrictions meant that I could go and get a haircut, go to the pub, and take Mrs Smith out for dinner (albeit sat outside feeling rather chilly). If the continued roadmap for easing restrictions continues, we could be in a position in a couple of months’ time when businesses will be able to operate freely. In this case, there are a couple of reopening stocks that I’d buy now that could really benefit from this.
Physical stores reopening
First up is Burberry (LSE:BRBY). It’s the only luxury fashion retailer within the FTSE 100 index. It’s one of my key reopening stocks because, although online sales have increased during the past year, physical stores are still needed to generate revenue for the brand. I think the key element to this is the fact that the business is at the highest end of the fashion market, so customers want to enjoy the luxury store experience before purchasing.
The closure of stores negatively impacted revenue in 2020. Although we wait for more clarity via its results next month, the Q3 update in January showed that a number of stores were still closed during that period. This was particularly felt in the EMEIA region, where comparable store sales were down 37%.
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Given that Asia has reopened quicker than Europe, Burberry has already seen a rebound in sales. The outlook is that “comparable store retail sales in Q4 FY2021 are expected to be in the range of 28% to 32% higher than the same period last year”.
A potential risk to Burberry is that Chinese sales could weaken as China and its consumers object to its dropping of certain cotton products from the country. This was due to stories of forced labour in the cotton-producing Xinjiang region. Popular Chinese actress Zhou Dongyu terminated her ‘ambassador’ contract with Burberry last month on its stance.
That aside, the Burberry share price may be up 40% over the past year, but is only up 4% over two years, so I think there’s clear long-term upside potential.
A reopening stock for the future
Another reopening stock that I’m looking to buy now is Auto Trader Group (LSE:AUTO). It’s a well known online marketplace for new and used car sales. Although it’s online, very few people would consider buying a car without having a look at it.
With car dealerships being able to reopen last Monday and car-buying activity increasing, this should provide a boost going forward for Auto Trader. As my colleague Jabran Khan noted, Auto Trader’s market share is five times that of the next player, Gumtree.
One risk here is that the bump from reopening with regards to car sales may be smaller than I expect. UK unemployment has risen close to 5%, the highest level for five years. Even if people haven’t lost their job, many have suffered financially from the pandemic. So some might decide to postpone a car purchase, seeing it as an unneeded expense.
For the six months through to the end of September, operating profit fell 48%. This has weighed on the share price, with it down 1% over the past six months, but up 32% over the past year.Again I think this short-term stagnation should turn around later this year.
