3 of the cheapest retailers for your portfolio

With retail sales booming, here's 3 opportunities in the retail sector

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Retailers rejoice! News out today shows that consumers are again spending.

Retail sales data from the Australian Bureau of Statistics (ABS) grew 1.2% in January, adding to the 0.5% growth in December, and three times higher than economists' expectations of 0.4% growth.

And given some of the recent half year reports from retailers, there are signs that consumers are out shopping again. Analysts were surprised by the strong figures, despite weak consumer sentiment and a relatively cheap jobs market.

Here are three very different retailers that could benefit in the year ahead.

Automotive Holdings (ASX: AHE) currently pays a 5.4% fully franked dividend yield, and could benefit if the federal government decides to remove taxes and duties on imported and luxury cars. Originally put in place to protect the local manufacturers, these fees are now redundant given the decisions of Ford, Holden and Toyota to cease making cars locally. Not just a car dealer, Automotive Holdings also has a growing refrigerated transport business. Automotive Holdings is currently trading on a prospective P/E ratio of 11.9 for the 2015 financial year, which doesn't look expensive.

The Reject Shop (ASX: TRS) has seen its share price almost halve since late January. A poor first half earnings report suggests the company has struggled with the rollout of twice as many stores as usual over the past 18 months or so. The Reject Shop will have an additional 45 discount variety stores by the end of this financial year, taking the total number to 320 stores by July 2014. With massive growth in store numbers and additional growth as those stores mature, The Reject Shop may have been underestimated by the market. Assuming the issues the company faces are long term in nature could be a mistake, and allow savvy investors to pick up the stock on the cheap.

Vita Group (ASX:VTG) owns and operates telecommunications stores on behalf of the likes of Telstra Corporation (ASX: TLS) and Apple (through its NextByte stores). Most recently, the company announced a deal to expand its Telstra store numbers, and with the growth in mobile devices, Vita Group could be set to benefit from piggy-backing along with Australia's dominant telco. Vita Group is currently sporting a 2015 financial year P/E  of just 7.8, but is growing much faster than that.

Foolish takeaway

Paying decent fully franked dividends, trading at a fairly cheap price and with good growth ahead, investors may want to add these three stocks to their watchlist.

Motley Fool writer/analyst Mike King owns shares in Telstra Corporation. You can follow Mike on Twitter @TMFKinga

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