Here are 2 retail shares to buy and 1 to avoid

The retail industry has not been an easy place to invest during the last 12 months due to weak consumer spending and the arrival of Amazon in Australia.

However, I wouldn’t tar all retail shares with the same brush. I think there are a number of quality retail shares worth considering today.

Here are two to buy, followed by one to avoid:

Premier Investments Limited (ASX: PMV)

Although its shares are closing in on an all-time high, I still see a lot of value in Premier Investments in the long-term. This is largely down to two key brands in its portfolio – Peter Alexander and Smiggle. Management expects the Smiggle brand to achieve annual sales in excess of $450 million by FY 2020. This is almost double the sales the brand generated in FY 2017.

Super Retail Group Ltd (ASX: SUL)

I am optimistic that the hard work management has done to prepare for Amazon’s launch will allow it to compete successfully with the retail behemoth and continue its growth. This could make it a great option for investors after its sharp share price decline over the last 12 months and the trailing fully franked 5.6% dividend its shares provide today.

Retail Food Group Limited (ASX: RFG)

Although Retail Food’s shares are arguably dirt cheap after their dramatic fall at the end of last year, I am concerned they could be a classic example of a value trap. My main fear is that the recent media coverage will lead to a sharp drop in franchise sales and renewals, ultimately leading to the shrinking of its store network and profitability.

Finally, here's another quality retail option that continues to deliver for investors.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Retail Food Group Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. 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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