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Revealed: My unsung heroes from the reporting season

Experts have largely given the August reporting season a thumps-up as a number of stocks have dominated the spotlight – although not all for their profit numbers.

While it’s not an auspicious way to end the August reporting season with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index falling 0.3% in after lunch trade, few would be complaining as the market has added nearly 1% over the month.

There has been lots of airplay for reporting season heroes from blue-chips like blood products maker CSL Limited (ASX: CSL) to tech boomers WiseTech Global Ltd (ASX: WTC) and Appen Ltd (ASX: APX).

While even embattled telcos Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM) have found their way back into investors’ good books.

But there’s a quiet group of achievers that have managed to defy the odds and surprised me during the reporting season.

They are small cap retailers that had to battle an unfavourable exchange rate, erratic consumer spending, low wages growth and the big trend towards online shopping that favours the likes of Amazon.com and Kogan.com Ltd (ASX: KGN).

There are three that are worth highlighting. While their share prices have surged ahead on their gravity defying results, I suspect the stocks will continue to outperform for the rest of FY19 as they are probably only at the start of their upgrade cycle.

The first is baby products retailer Baby Bunting Group Ltd (ASX: BBN). Its share price surged around 39% on August 10 when it posted a 9% increase in sales to $303 million.

That’s not the what got investors excited. It was the FY19 outlook as the retailer was off to a roaring start in the first six weeks of the financial year with same store growth of nearly 10% thanks to the collapse of a key competitor, Toys ‘R’ Us.

The second small retailer of note is Adairs Ltd (ASX: ADH). I was anticipating a pleasing result but I think management shot the lights out when the homewares and home furnishing group reported a 14% jump in like-for-like sales as total revenue increased 19% to $314.8 million.

The 75% surge in online sales helped and isn’t that surprising given the trend, but I wasn’t expecting to hear that more shoppers are going into their stores and these customers are buying more frequently.

Outdoor and auto accessories retailer Super Retail Group Ltd (ASX: SUL) also delivered a very respectable report card this month.

I will admit I was sceptical about Super Retail’s chances of coming good given that camping and auto parts are the type of products ripe for the online disruption, but it looks like there’s no real substitute for great customer service with management crediting improved customer engagement for its 4% increase in revenue to $2.6 billion and a 7% jump in underlying net profit to $145.3 million.

What’s more, Super Retail said trading in FY19 is off to a promising start with positive like-for-like (LFL) sales across all its brands, particularly its recently acquired Macpac business which has recorded a LFL sales increase of 7%.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd, Super Retail Group Limited, and WiseTech Global. The Motley Fool Australia has recommended Kogan.com ltd. 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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