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3 dirt cheap retail shares

The retail industry has collectively suffered from the threat of Amazon’s arrival over the past year.

Well, Amazon has partially arrived and the world hasn’t caved in yet.

Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH) may suffer from compressed margins and reduced sales volumes in the future, but I think the following three shares could turn out to be bargains:

Greencross Limited (ASX: GXL)

The Greencross share price has been under pressure recently because the market thought that Amazon would hurt Petbarn’s earnings.

Whilst it’s true that some of Petbarn’s products could be in danger from the low-cost Amazon options like pet accessories, I think most of Petbarn’s sales are safe. It sells a lot of products that it would have good economies of scale, particularly its private label pet food.

Petbarn could also benefit quite well from the co-location strategy that management are utilising where a Greencross is installed in a Petbarn. This should help by saving costs and send some Greencross customers to Petbarn.

Greencross is currently trading at 16x FY18’s estimated earnings with a grossed-up dividend yield of 4.21%.

Bapcor Ltd (ASX: BAP)

Bapcor is the largest auto parts distributor in Australia with its Burson and Autobarn brands. The market was fearful that Amazon could steal a lot of this auto part business but there may not be that much potential damage.

A lot of Bapcor’s profit is made by the Burson brand, which mainly services mechanics by supplying parts within two hours. It would take a very long time for Amazon to build up a network to challenge this service and relationship.

Bapcor is currently trading at 24x FY17’s earnings with a grossed-up dividend yield of 3.27%.

Scentre Group (ASX: SCG)

Scentre Group is the owner of Westfield shopping centres in Australia and New Zealand. Shopping centres could be one of the retail shares most in trouble from the rise of the internet, however that doesn’t mean Westfields can’t be shopping ‘destinations’ where people visit for an experience, not just the cheapest price.

The value of Scentre Group may fall due to rising interest rates but it’s currently trading at 17x FY18’s estimated earnings with a distribution yield of 5.17%.

Foolish takeaway

I’d be very happy to buy shares of Greencross and Bapcor at today’s prices, I think both will surprise the market positively over the next year. However, I couldn’t say that Scentre would be a market-beating buy at today’s price.

There may be one retail share that could beat all the other ones I've listed, this share may be the best retail share of all.

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Motley Fool contributor Tristan Harrison owns shares of Bapcor and Greencross Limited. The Motley Fool Australia owns shares of and has recommended Bapcor and Greencross Limited. The Motley Fool Australia has recommended Scentre Group. 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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