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Buyers in search of publicity to the booming GLP-1 weight-loss medication market don’t have many choices within the FTSE 100. There’s AstraZeneca — which has tried to muscle in on the motion with out success — however not a lot else.
Nevertheless, there are FTSE 100 companies that ought to be second-order beneficiaries of the highly effective GLP-1 megatrend.
For instance, contemplate feedback made not too long ago by Sean Dixon, co-founder of Savile Row tailor Richard James. He mentioned prospects are dropping large quantities of weight in an extremely quick time.
It’s not simply half an inch right here, possibly an inch there, it’s a substantial quantity of weight reduction and which means a complete new wardrobe.
Sean Dixon, quoted in The Unbiased.
Round 1.5m individuals within the UK are taking GLP-1 drugs like Wegovy and Mounjaro. Nevertheless, round 18m reside with weight problems, in order these medication get cheaper, this development has a lot, a lot additional to run over the following decade.
New wardrobes
It is perhaps imagined this might profit JD Sports activities, as youthful generations slip into smaller-sized tracksuits and joggers. Nevertheless, the most important uptake of GLP-1 medication is outwardly amongst these of their 40s, 50s and 60s. These cohorts have extra disposable revenue.
To my thoughts then, two shares that look extremely nicely set as much as profit from this development are Subsequent (LSE:NXT) and Marks and Spencer (LSE:MKS). Each ought to cater to older professionals present process vital weight reduction.
M&S
Marks and Spencer (M&S) has a clothes buyer base of 21m individuals. Sadly, they have been unable to purchase on-line earlier this 12 months because of the notorious cyberattack.
Within the six months ended 27 September, this incident brought on the agency’s pre-tax revenue to crash 55.4%. Any repeat of it is a main danger, particularly as administration has mentioned that “the restoration curve has been slower” for its Trend, House and Magnificence division than meals.
The share value stays 17% decrease than April. Nevertheless, this leaves the inventory buying and selling at simply 10.2 instances subsequent 12 months’s forecast earnings. There’s additionally a 2% forward-looking dividend yield.
Zooming out, I believe that’s too low cost for a high-quality enterprise like this. M&S is present process a “manufacturing facility to flooring” supply-chain overhaul, together with investing £120m in warehouse automation. It goals to double on-line non-food gross sales to just about £3bn to shut the hole with rival Subsequent.
Sturdy abroad development
Talking of which, Subsequent continues to place up very stable numbers. Final month, it elevated full-year steering for the umpteenth time and now expects a pre-tax revenue of £1.13bn.
Significantly spectacular is its abroad enterprise, the place gross sales jumped 38.8% within the third quarter. Within the US, the place round 12% of the inhabitants have already taken weight-loss medication, gross sales of Subsequent-branded garments are surging.
This abroad development is vital as a result of the UK economic system stays weak, including danger to retailers like Subsequent. The inventory’s valuation can be larger, at 17.8 instances ahead earnings.
Nevertheless, given the agency’s market-leading place and powerful historical past of execution, I don’t assume the inventory’s overvalued. It additionally sports activities a decent-ish 2.3% ahead dividend yield.
Trying forward, the abroad alternative stays very massive, with majority-owned model Reiss resonating very strongly with prospects worldwide.
For traders trying to spend money on a top-notch retailer, Subsequent inventory deserves critical consideration, in my view.
