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Is this the start of a retail recovery?

Retailers may be recovering, and back on the growth road – if recent results are to be believed.

Fantastic Holdings (ASX: FAN), the owner of Fantastic Furniture, Plush, Dare Gallery, Le Cornu and Original Mattress Factory, says it has seen positive sales growth in the first quarter of 2013 financial year, compared to last year, despite weak consumer spending.

The company says it’s still cautious, but believes that the retail outlook in Australia is gradually improving. The next financial year will continue to be challenging and highly competitive, says Managing Director, Julian Tertini.

Fantastic recorded an 8% increase in net profit after tax for the 2012 financial year, and expects to beat that this year.

Fashion retailer, Country Road (ASX: CTY) has also reported an increase in sales growth, with a 13.5% jump in same store sales in the first four months of the 2013 financial year. The company is 88% owned by South African retailer, Woolworths Holdings (not related to Australia’s Woolworths), and the remaining 12% is owned by Solomon Lew’s private investment company, Australian Retail Investments.

Consumer electronics retailer, JB Hi-Fi Limited (ASX: JBH) announced yesterday that like-for-like sales are down by 2.4%, showing that not all retailers are experiencing a recovery. Still, the company remains confident that it can grow market share, and drive sales through production innovation. A slew of new tech gadgets are also likely to increase sales in the lead up to Christmas, following the launch of Apple’s iPhone 5 and iPad Mini, Microsoft’s newest operation system, Windows 8, and its Surface tablet. Nintendo’s much anticipated Wii U is also coming.

The recent failure of cut-price retailer, Retail Adventures has opened up opportunities for other companies. There are media reports that The Reject Shop (ASX: TRS) has flagged plans to expand in Tasmania, following the financial troubles of its competitor, Chickenfeed, which is owned by Retail Adventures. Chickenfeed has closed 29 stores in Tasmania, and further closures could come. The Reject Shop now plans to open four new stores in Hobart and another two elsewhere in the state by early next year, more than doubling the company’s presence in Tasmania.

Foolish takeaway

With retailers dropping like flies (WOW Sight and Sound, GAME and Retail Adventures), that leaves more room and opportunities for the retailers that are left. As I mentioned recently, there may not be many left, but those that are, will be stronger and more dominant than before.

If you only invest in one company this year, make it our “Top Stock for 2012-13”. Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading

Motley Fool writer/analyst Mike King owns shares in JB Hi-Fi.  The Motley Fool ’s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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