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Should you buy these retail shares?

The retail industry certainly has been a tricky place to invest in over the last 12 to 24 months.

Weak consumer sentiment, low foot traffic, and changing consumer preferences have hurt some retailers, while others have continued to thrive.

With that in mind, I thought I would look at a few retail shares to see if there is an investment opportunity.

Are these three retailers in the buy zone?

Greencross Limited (ASX: GXL)

As well as operating a chain of veterinary clinics nationwide, Greencross has exposure to the retail sector through its Petbarn stores. I have been very impressed with the progress of its in-store veterinary clinic roll out. Retail stores with in-store clinics inside them reported a 7.5% increase in like-for-like sales growth in the first half of FY 2018. I expect more of the same in the second half as its roll out gathers pace and its loyalty program grows in popularity. So with its shares trading close to a 52-week low and at just 14x trailing earnings, I think now could be a good time to snap them up.

Reject Shop Ltd (ASX: TRS)

Long-suffering shareholders of the discount retailer will be delighted to see its shares trading close to a 52-week high at present. Reject Shop’s solid half-year result and bullish full-year guidance were behind this strong share price performance. In February Reject Shop provided FY 2018 net profit after tax guidance of between $16.5 million and $17.5 million, well ahead of last year’s NPAT of $12.3 million. Investors appear to believe the worst is over for the company, this could make it worth a closer look in my opinion.

Super Retail Group Ltd (ASX: SUL)

Whilst I am a fan of Super Retail’s Auto and Sport divisions, I’ve been very disappointed with the performance of its Leisure segment. Because of this, I was surprised to see the company add to the segment earlier this year rather than divest it. The Macpac acquisition could ultimately prove to be a master stoke by management, but until I have seen proof of this I plan to sit on the sidelines. Especially with its balance sheet looking quite stretched now.

Instead of Super Retail I would be buying these star stocks with enormous growth potential.

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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 Greencross Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended The Reject Shop 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 Scott Phillips.

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