Why you should add these 3 retail shares to your watch list today

Credit: Peter Heath

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has a number of retail shares for investors to look at adding to their portfolio. With the industry being fiercely competitive it can be difficult to decide on which you should pick. I have picked out three shares which I think should be added to your watch list today.

JB Hi-Fi Limited (ASX: JBH)

The absence of rival Dick Smith Holdings Ltd (ASX: DSH) from the market should be a big boost to the top line of JB Hi-Fi. Despite all of its problems, Dick Smith still pulled in revenue of over $1.3 billion last year.

I’m sure JB Hi-Fi and Harvey Norman Holdings Limited (ASX: HVN) will be rubbing their hands together at the prospect of increasing their share of the market.

According to CommSec, analysts have recently bumped up their earnings growth estimates for JB Hi-Fi to 5% this year and 6% next year. If the company can win a good share of the old Dick Smith customer base, I would expect there’s every chance its growth could accelerate further.

Kathmandu Holdings Ltd (ASX: KMD)

Kathmandu has been struggling in the last couple of years, but there are signs that things could now be improving. The travel and adventure retailer shut the doors of its UK stores and cancelled European expansion plans late last year in order to concentrate on fixing its Australian business.

Instead of operating stores abroad the company is now focused on expanding its online business internationally. I believe this is a smart move and feel quite optimistic on this new strategy.

However the market does appear to be divided on the future prospects of the company. This explains why it trades at a low estimated forward price-to-earnings ratio of just 11.

On March 22 the company will report its interim results. If these are looking positive, then I would expect a strong rally in the share price. For this reason I think it is worth adding to your watchlist.

Premier Investments Limited (ASX: PMV)

Few Australians will have heard of Premier Investments, but the majority will know their exciting portfolio of brands. These include well-known names such as Smiggle, Just Jeans, Portmans, and Peter Alexander.

Smiggle is perhaps the most exciting brand in the portfolio at present with year-over-year sales growth of 26%. Its expansion into the United Kingdom appears to be going very well and should prove to be a great revenue driver over the next few years.

My personal favourite is sleepwear retailer Peter Alexander. The store designs are unique and the quality and design of the sleepwear is of a high standard. In the last year its sales were up 15% year-over-year. I believe Peter Alexander is another brand with the potential for expansion into the United Kingdom in the future.

Retail is a tough environment let’s not forget. Premier Investment’s brands do face strong competition from the likes of H&M, Camilla, and Kikki K, but for now they seem to be winning the battle.

In my opinion Premier Investments is a company that should be on your watch list at the very least.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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