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While everybody else is busy packing gifts under the Christmas tree, savvy investors are also watching retail stock profits soar. In the hope of boosting my dividends in 2026, I’ve identified two British income shares that typically benefit from the holiday spending spree.
Let’s see if this year will deliver the same fortunes for these retail giants.
Sainsbury’s
Time and time again, Sainsbury’s (LSE: SBRY) wins grocery market share over the festive season, with shoppers trusting it to deliver top quality goods. I’ll admit, I’m a Tesco loyalist, but I can’t deny that Sainsbury’s has the upper hand when it comes to Christmas products.
According to results, last Christmas saw a 16% sales rise in its Taste the Difference products, while festive food sales soared nearly 40%. In the run up to the big day, the retail giant was selling over 200 bottles of bubbly every minute — testament to its festive season dominance.
For income investors, the attraction’s clear: a 4.5% dividend yield backed by a decades-long track record of payouts and a share price up 46.4% in five years.
With UK food spending forecast to reach £38bn this season, Sainsbury’s position as the market leader ensures it captures a disproportionate share of this spending.
But investors still need to consider long-term risks. Competition in the retail sector is fierce, with inflation nudging consumers toward lower-cost rivals like Asda and Lidl. With already razor-thin margins, Sainsbury’s could face a dividend cut if profits dip or debt payments take priority.
Halfords
While Sainsbury’s sorts out the festive spread, Halfords (LSE: HFD) dominates a different but equally important role: gifts. As the UK’s leading cycling and auto spares retailer, it benefits from one simple but powerful truth — bicycles remain one of the nation’s most popular Christmas presents.
Adding to this, the company has strategically positioned itself to capture demand across motoring accessories, tools and tech gadgets — categories expected to see strong growth this season.
For income investors, the 6.3% dividend yield makes it one of the FTSE 250‘s more generous stocks to consider. Recent interim results for the 26 weeks to 26 September, show a 4.1% increase in like-for-like sales, driven by strong performance in the Cycling and Autocentres segments. The company declared an interim dividend of 3p per share and increased its net cash to £18.6m.
With a favourable returns policy and generous delivery options available, Halfords is well-positioned for a strong festive quarter.
Cost inflation remains a key risk though, adding around £120m to the cost base in three years. A 43% price decline since the pandemic reflects this, and if stubborn inflation continues to limit consumer spending, it could fall further.
A long-term outlook
At The Motley Fool, we encourage a long-term outlook rather than catching cyclical dips. Critically, past performance doesn’t guarantee future returns – particularly in the current economic climate. Consumer spending remains cautious and UK retail volumes are forecast to decline 0.3% even as values rise.
Still, for UK income investors keen on retail exposure, now may be a good time to consider Halfords and Sainsbury’s. Together, they could give a portfolio a much-needed boost heading into 2026. But don’t stop there: similar Christmas-friendly stocks to consider include Marks & Spencer, Next and Games Workshop.
