As the festive season approaches, our investment guru ANNE ASHWORTH reveals the companies on her shopping list

The lights of Oxford Street and Regent Street have come on in London, the sequined dresses are glittering in the windows and the TV adverts for food in the supermarkets have been unveiled to whet the appetite for turkey and a host of sweet and savory treats.

It’s starting to look a lot like Christmas, which means attention is turning to the outlook for retailer stocks.

Will the holiday results leave shareholders feeling warm, or prove to be a letdown? Will Black Friday discounts spoil the party?

Overshadowing the fun will be the big Budget blow for retailers.

Their costs are expected to rise by millions due to higher employer national insurance contributions and increases in the minimum wage.

Price increases in 2025 appear inevitable, a prospect that has hit retailer shares in recent days. But for now, the focus for the High Street’s big names is on trading in the coming weeks.

Mamta Valecha of asset manager Quilter Cheviot says that while consumers remain value-conscious, they are “willing to spend on novelty and innovation.” As a result, she expects a rebound in demand in time for Black Friday on November 29 – and before Christmas.

This assessment suggests that retailers willing to take steps to surprise and delight could be the names to back this season.

Among those who study trends in this sector, there is a lot of talk about “modern mainstream consumers,” people across all demographics who eschew the sloppy and want quality and an extra dose of style. Pleasing these shoppers is the path to more sales.

Marks & Spencer CEO Stuart Machin is cautiously optimistic about his customers’ willingness to part with their money for these and other more traditional dishes. This week he reported an increase in pre-orders for all Christmas food.

M&S muse actress Sienna Miller’s party dresses and designer Bella Freud’s collection are also in high demand: 9,000 jumpers from this range were sold in just two hours, highlighting the desire for something different.

On Wednesday, Machin revealed a 17.2 percent rise in half-year profit to £407.8 million, a figure well above analyst expectations.

He said: ‘We are well prepared for Christmas – with our best food range ever.’

Machin’s sentiment that the nation could be prepared to spend more this year echoed last month’s message from fellow FTSE 100 retailer Next, which said improved consumer confidence was boosting sales.

Even embattled fast-fashion company Asos reports that shoppers are attracted to ‘newness’, although this may not be enough to revive the shares, which are now worth 365p from their peak of 7630p in the spring of 2018.

This brighter mood may partly stem from the downward trend in interest rates. But it is also the result of the fact that the budget has not put pressure on most taxpayers. Chris St John, portfolio manager at AXA Investment Managers, said: ‘The Budget has handed the heavy lifting to businesses through the increase in national insurance contributions for employers.’

Among the beneficiaries of the higher minimum wage imposed by the budget should be ABF, the Primark group. ABF’s share price has fallen to 2260p this year, but analysts rate the shares as ‘hold’ and target a price of 2529p. In this new, more liberal spending environment, consumers’ budgets won’t necessarily be much bigger, as Chris Beckett, Quilter Cheviot’s head of equity research, explains. But they will be willing to pay more for quality.

He believes this should be good news for supermarket giants M&S, Tesco and Sainsbury’s, which are adapting to offer more expensive dishes. If you’re considering putting these companies on your Christmas investment shopping list, you might be thinking that M&S’s share price has risen so much that more profits are unlikely.

However, analysts believe the shares should rise further as the company’s turnaround continues to accelerate. At the end of 2022, the year Machin was promoted to the top job, you could buy M&S shares for 90p.

They have risen to 376 cents – which is about 230 percent higher than their price two years ago, when they were featured in this column. I’m still glad I took my own gamble on the stock back then – the gift to myself that keeps on giving.

The average price target of analysts is 400 cents. But Peel Hunt predicts 425p. UBS has set a target of 465p.

Ian Lance of Temple Bar Investment Trust, which has a stake in M&S, claims the shares have ‘significant upside potential’ and a price of 500p would not be unreasonable.

Tesco chief executive Ken Murphy said last month that shoppers were “in good shape” ahead of Christmas. Britain’s largest supermarket is responding to the desire for something special by investing in the Finest range.

Since January, shares have risen 18 per cent to 345.3p.

But the likelihood of further transformation at the £24.3bn giant means analysts see room for further upside in the shares, with an average price target of 392p.

I will continue to hold my small stake in Tesco in the hope of greater appreciation.

Sainsbury’s performance this year has been less palatable, although progress has been made in its renewal.

Profits fell due to the sale of the banking division and other company restructurings. Since the start of the year, shares in the chain, number two in the supermarket class, have fallen 17 percent to 250 cents, despite an 18 percent increase in sales of its premium Taste the Difference range.

But at this level it represents a cheap bet on consumers rising in value – and the dividend yield is an attractive 4.89 percent. There are 46 shopping days until Christmas. But the first test of the country’s desire to loosen the purse strings will come with Black Friday, when upgrading laptops, phones and TVs has become a tradition – when optimism reigns.

Shares in Currys, the electronics chain, have risen 60 percent to 81 cents this year on the belief that shoppers will feel more positive.

Analysts seem convinced that this will be the outcome. They rate the shares as ‘buy’, with an average price target of 102 cents.

Turnaround has become the watchdog on the high street, with even stock market darling Next undergoing changes as it becomes more of an international player, selling its own label and dozens of others worldwide.

A small package of shares in this extremely talented retailer is on my shopping list.

Some weakness in the share price would be a Christmas bonus, but sometimes you have to pay for quality.

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