While the abject performance of retailers such as Myer Holdings Ltd (ASX: MYR) and Oroton Group Ltd (ASX:ORL) and the arrival of Amazon has scared some investors off the retail sector, I still think the sector has some quality investment options that are worthy of inclusion in a balanced portfolio.
Three retail shares which I think are in the buy zone today are listed below:
Baby Bunting Group Ltd (ASX: BBN)
While the shares of this baby products retailer are no longer an absolute bargain buy following a strong rebound, I still feel they represent great value for money. Baby Bunting has been a victim of its own success this year. Its strong performance has led to the closure of competitors and subsequent clearance sales. These clearance sales will be a short term headwind and are expected to cause flat earnings this year, but moving forward I expect Baby Bunting to grab a greater share of the market and deliver strong earnings growth.
Greencross Limited (ASX: GXL)
As well as its veterinary practices across Australia and New Zealand, Greencross has a retail presence through the Petbarn brand. Thanks partly to its increasingly popular loyalty program, like-for-like sales in its Australian retail business grew 4.3% in FY 2017. Another key driver has been the roll out of its in-store clinics. Approximately 17% of its stores now have a clinic inside, but management intends to grow this to over 60% in the future. I think this is a retailer well worth considering as a buy and hold investment.
Noni B Limited (ASX: NBL)
When it comes to retail shares I love those that operate within niches. Noni B and its collection of brands does exactly that, serving the mature women's fashion market. Last week the company provided a positive trading update which revealed that it expects to report first-half EBITDA of $22 million. This will be more than 50% higher than the prior corresponding period's EBITDA of $14.3 million. Furthermore, it is just a touch less than FY 2017's full-year EBITDA of $22.9 million, which also included a 53rd week.
