Deutsche Bank has initiated coverage of three UK retailers this morning, as Christmas trading is likely to be robust and margins are expected to recover.

Deutsche Bank initiated coverage of ASOS, Marks & Spencer and B&M with a Buy rating.

The analyst’s preference in U.K. retail cites their “specific and interesting” investment cases. While Christmas trading is expected to be strong, the analyst warns that this could be the last surge of post-pandemic spending.

The analyst believes that U.K. retailers are generally in good shape with margins expected to recover in 2024 and healthy balance sheets, although “growth will likely be anemic.”

B&M’s value proposition has been a significant driver in its growth this year, with the cost-of-living crisis causing consumers to trade down. Its expansion in its store portfolio will likely carry its momentum into 2024, with its share price already gaining almost 30% this year.

Additionally, M&S improvement in style and value for money has fuelled a turnaround for the retailer. M&S recently reported revenue growth of 10.8% and profit before tax of £325.6m in the six months to the 30 September. Its strong results showcase its development in its clothing and food ranges, which have focused on trends and value.

By James Fyeman