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Australia’s best retail stocks

The ASX is serving up many well known brands for heavily discounted prices that will make a healthy addition to your portfolio. Whether they’re in clothing and fashion, consumer electronics or diversified, many of our favourites are cheap and paying truly spectacular dividends.

Here are three of Australia’s best retailers that have proved time and again that the industry is here to stay. Whether they are growth, core or income investments, the industry has it all.

Myer (ASX: MYR) is one of the ugly ducklings in the retail space and its modest growth has sent investors to the sidelines. As the company aims to become more competitive by lowering its prices and targeting a wider audience, the clothing retailer will immerse itself in a much more lucrative market. At current prices, Myer pays a 7.8% fully franked yield and could be considered a good quality income stock, particularly with interest rates set to fall even further.

Harvey Norman (ASX: HVN) has shown superiority across many of its divisions including furniture, bedding and home appliances, and with a new Customer First Strategy, it hopes to improve its performance across its other key categories including entertainment and technology.

The company’s operational strategy to buy in bulk and sell at higher margins has largely been offset by the high Australian dollar and GST exemptions on imports and encouraged online shopping by consumers. With a lower exchange rate, the company’s products will become more competitive and although its international expansion could become a costly learning curve, the opportunity to make substantial profits exists. Together with its diversified business model, Harvey Norman is a good ‘core’ stock that pays a healthy 3.6% dividend.

One of the industry’s greatest success stories is Super Retail Group (ASX: SUL). Since the GFC, the company has risen over 430% because of great offers and incentives to beat any price in the lower end of the retail market. The company operates under brand names like Super Cheap Auto, BCF, Goldcross Cycles, Rays Outdoors, FCO, Rebel and Amart and is opening stores at a rate of around 30 per year.

Although the company forecasted slower growth for the coming three years, it still has a large upside and the higher current P/E should be reduced with a very successful FY12. Paying a 2.9% dividend, Super Retail Group might be considered a well-rounded growth stock that defies the online shopping trend.

Foolish takeaway

When you feel that an industry may be challenging in years to come, remember that patience doesn’t cost you money and be sure to buy at a price that compensates for the increased uncertainty. On current prices, Super Retail Group is a little expensive and may be a great long-term stock but a savvy investor might wait for a cheaper entry point to compensate for the reduced amount of growth in years to come.

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Motley Fool contributor Owen Raszkiewicz owns shares in Myer. 

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