The retail industry is not only a tricky place to operate, but it is an equally tricky area to invest in. Fierce competition, changing consumer habits, and the arrival of international juggernauts are just three of a number of headwinds facing Australian retailers.
This has led to previously dominant companies such as Myer Holdings Ltd (ASX: MYR) and Woolworths Limited (ASX: WOW) suffering a significant drop in earnings and unfortunately a similarly sharp drop in their share prices.
Thankfully not all retailers have been suffering. In fact, three retailers in particular have grown earnings at a rapid rate recently. But can this growth continue for them?
Baby Bunting Group Ltd (ASX: BBN)
This baby products retailer grew like wildfire in FY 2016, posting a 31.4% jump in sales and a 55.8% increase in net profit after tax. Pleasingly for shareholders FY 2017 appears to have started just as strong. At its annual general meeting in November management revealed that comparable store sales had grown by 10% for the first four and a half months of FY 2017. Although it is a reasonably niche market, there is still substantial growth ahead for the company in my opinion. Management plans to grow its store network from 36 stores to 80.
JB Hi-Fi Limited (ASX: JBH)
In the last 10 years JB Hi-Fi has grown its earnings by an average of 16.7% per annum. Thanks to the acquisition of The Good Guys I believe the company can continue to grow earnings at a similar rate for the next few years. That is, of course, if US-giant Amazon doesn't crash the party. Having witnessed the impact Amazon had on British electronics retailers, I am concerned that its arrival in Australia could be just as brutal for retailers here. Whilst at this stage its arrival is only speculation, I still don't feel confident investing in either JB Hi-Fi or Harvey Norman Holdings Limited (ASX: HVN).
