2 growing retail shares I think you should buy today

Credit: Kira

There are a number of retail shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). With so many to choose from it can be hard to decide which to include in your balanced portfolio.

In such a competitive industry you really don’t want to have another Dick Smith in your portfolio. Thankfully, I believe there are a couple of shares which stand out as being great investments.

The two retail shares in question are:

Premier Investments Limited (ASX: PMV)

Premier Investments is the company behind hugely popular brands such as Smiggle, Just Jeans, Portmans, and Peter Alexander. It has posted an outstanding year so far, with its share price climbing by almost 15%.

But this has every chance of continuing thanks to the success of two key brands Smiggle and Peter Alexander. Their success is especially pleasing considering the two brands have higher margins and stronger levels of profitability than the company’s other brands.

Smiggle’s expansion into the United Kingdom has been phenomenal. This expansion helped the brand increase its year-over-year sales by 26%. There are 70 Smiggle stores in the UK at present, but management sees the possibility of increasing that to 200 in the next few years.

I believe there are significant expansion possibilities with the Peter Alexander brand also, which should support strong bottom line growth for a number of years to come.

Harvey Norman Holdings Limited (ASX: HVN)

Electronics and homewares retailer Harvey Norman is another share I feel investors should look at buying today.

Its interim results were nothing short of fantastic and I believe there is a good chance that it will do just as well in the second half of its fiscal year.

Harvey Norman reported an increase in net profit of 31% to $185.5 million. With Dick Smith closing down, I believe it is positioned to take hold of the market share that will be vacated and build on these results.

The company also has significant operations overseas which will have been boosted by the weaker Australian dollar. Its global revenues grew to $3.3 billion for the period ending December 31 2015.

The company also continues to benefit from a thriving Australian housing market. I expect this to remain the case for the next 18 months at least, which should lead to another strong performance by the company in both the second half of the fiscal year and next year.

Currently its shares are trading at just under 17 times estimated forward earnings, which makes them very attractive in my opinion.

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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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