Virtually every investor knows about the big ASX-listed retailers, but there are several not so well-known retailers that could be worthy of adding to your watchlist.
The bigger retailers include the likes of Myer Holdings Limited (ASX: MYR), Harvey Norman Holdings Ltd (ASX: HVN), Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) – owner of Coles, Bunnings, Officeworks, Target and KMart.
But not many investors would have heard of Lovisa Holdings Ltd (ASX: LOV), RCG Corporation Limited (ASX: RCG), PAS Group Ltd (ASX: PGR), Beacon Lighting Group Limited (ASX: BLX) or Grays eCommerce Group Ltd (ASX: GEG). And that’s despite the fact that many of us familiar with their stores or websites. Beacon Lighting, Diva jewellery, Athlete’s Foot, Grays Online, DealsDirect and TopBuy are just some of their brands.
And then you have more obscure retailers like Burson Group Ltd (ASX: BAP), Greencross Limited (ASX: GXL) and Vita Group Ltd (ASX: VTG). Burson does aftermarket auto parts, Greencross diversified away from being a pure veterinary services brand and now generates most of its revenue from the Petbarn chain of pet stores, and Vita Group runs most of Telstra Corporation Ltd’s (ASX: TLS) retail stores.
With the RBA cutting the cash rate last week and the banks passing on the cut to mortgage rates, consumers now have more cash in their pockets – good news for retailers. And with the price of petrol falling dramatically, even more cash is being given to consumers.
Now unless we all stuff those savings into our mortgages – as has been known in the past – retailers should see consumers spending more.
Of the companies mentioned above, Lovisa Holdings looks very promising. The company is a fast fashion jewellery retailer – most of its products are priced between $7 and $50. Lovisa has 220 stores in 8 countries with 157 in Australia – and 88 of those were Diva stores, currently being converted to the Lovisa brand.
The company today reported strong growth in revenues and net profit. A 66% rise in first-half profit on the back of a 33% increase in sales is an excellent performance, given the weak conditions. The prospectus issued in November 2014 noted same-store sales growth of 11.7% so far in the 2015 financial year.
At current prices, Lovisa is trading on a prospective P/E ratio of 15.1x and expects to pay a fully franked dividend of around 4.5%.
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Motley Fool writer/analyst Mike King owns shares in Woolworths and Greencross. You can follow Mike on Twitter @TMFKinga
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