A handful of shares are tipped to benefit through their exposure to this year's staycation theme.
The easing of lockdown restrictions are also expected to benefit Frasers Group (LSE:FRAS), Fevertree Drinks (LSE:FEVR), AG Barr (LSE:BAG) and Cake Box (LSE:CBOX) through their exposure to this year's staycation theme.
The latest retail sector analysis by Liberum flags an “exciting mix of opportunities” where companies are well-placed to capitalise on pent-up demand.
These include deep value and recovery plays, as well as longer-term growth and structural winners as companies emerge from Covid-19 stronger and better positioned.
The optimism is based on a number of positive indicators, with the vaccine roll-out and reduced Brexit uncertainty set to result in an economic recovery lasting well into 2022 and beyond. Households are also sitting on excess cash, estimated to be worth £170 billion, after a year in which the opportunities for discretionary spending have been significantly reduced.
In addition, real wage growth is holding up well and a mini housing boom is creating positive wealth effects in order to stimulate confidence.
Liberum's top trades
The pick of the value trades are Ted Baker and Superdry after Liberum said the pair's current valuations offered little credit for their ongoing strategic and operational overhauls.
Superdry shares dived as low as 70p in the early days of the pandemic but are now at 265p as investors increasingly eye the turnaround potential of founder and chief executive Julian Dunkerton's “influencer-led, digital marketing strategy”.
A similar story is playing out at Ted Baker, where chief executive Rachel Osborne is continuing to impress with progress on the reset of the business after a troubling couple of years.
Liberum has a target price of 400p on Superdry and has just upgraded Ted Baker from 180p to 225p after an impressive 60% run for shares to as high as 161p in this month alone.
The broker notes the pair are “re-igniting” their brands and product offer, as well as revamping marketing and creating leaner capital-light business models. Liberum said: “We also expect both to be near-term beneficiaries of easing lockdown restrictions and store re-openings.”
Card Factory is another stock offering upside at a target price of 120p, with near-term catalysts likely to be the successful conclusion to funding discussions with banks. Others warranting closer attention include Dixons Carphone with a target of 175p and Topps Tiles at 95p.
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The structural Covid-19 winners highlighted by Liberum include Hotel Chocolat (LSE:HOTC), which the broker sees as being on a path to becoming a global brand as its considerable growth headroom in the UK is accompanied by opportunities in Japan and the United States.
The note added: “The stellar performance throughout Covid-19 reflects both the group's operational agility and how well it has translated digitally”.
Liberum also expects Fevertree Drinks to be a re-opening beneficiary, with its strong off-trade performance over 2020 an encouraging guide to demand for long-mixed drinks and cocktails once the lockdown ends. Shares are rated a ‘buy’, with a target of 2,740p compared with today's 2,386p.
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