RCG Corporation Limited & Nick Scali Limited: 2 top retail stocks to own

As an investor I like to invest in what I can see, touch and understand. This is a major reason why retail stocks make up a large part of my portfolio. Over the last 12 months discretionary retail stocks have done particularly well with the S&P/ASX 200 Cons Disc Index rising over 12%.

With the confession season on our doorstep it is time to take a look at two of the very best retailers and what we should expect in their upcoming reports.

RCG Corporation Limited (ASX: RCG)

RCG Corporation operates The Athlete’s Foot retail brand along with holding distribution licenses for a range of well-known footwear brands. RCG Corporation recently entered into an agreement to acquire Hype Shoe stores.

Some key points from its latest trading update (FY 2016)

  • EBITDA of c.$60 million
  • Current like‐for‐like sales growth of 3.5% for The Athlete’s Foot stores
  • Current like‐for‐like retail sales growth of 20% from the Accent Group
  • Current like‐for‐like retail sales growth of 7% from RCG Brands

What to look for in the end of FY report.

As the RCG Corporation trading update was issued just three weeks ago we can reasonably expect the above numbers to be reported. As investors we need to watch for any new updates in the like-for-like sales after the end of financial year. I will be paying particular importance to LFL sales form the Accent group which is currently powering  RCG Corp’s performance.

Nick Scali Limited (ASX: NCK)

Nick Scali is a furniture retailer operating primarily on the east coast of Australia. The Company operates two brands; the Nick Scali brand and the Sofas2Go brand. Nick Scali has recently expanded its presence into Western Australia.

Some key points from its latest trading update (FY 2016)

  • On May 13, Nick Scali upgraded its forecast for NPAT for the 2016 FY from $22 million – $24 million to $24 million – $26 million.

What to look for in the end of FY report

Nick Scali has a habit of under promising and over delivering and as such I wouldn’t be surprised to see the NPAT coming in higher than forecasted.

Similar to RCG Corporation I will be keeping my eye on LFL sales growth along with how the movement in the Australian dollar has affected sales margins. The final key point in my opinion is the manner in which Nick Scali’s Western Australian stores are coping with the downturn in the Western Australian economy.

Whichever company you choose it is never too late to start investing.

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Motley Fool contributor Alan Edmunds owns shares of Nick Scali Limited and RCG Limited. 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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