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Should you buy these popular retail shares?

The Australian retail sector may be going through a reasonably tough time due to low wage growth and subdued consumer sentiment, but not all retailers are struggling.

Three retail shares that I think would be great investments are listed below:

Adairs Ltd (ASX: ADH)

One of my favourite options in the retail sector right now is this leading home furnishings retailer. The company bounced back from a tough FY 2017 with a stellar performance in FY 2018. Adairs delivered a 45.4% increase in profit to $30.6 million thanks to strong growth in like for likes sales, ecommerce sales, and lower levels of discounting. Pleasingly, the company has started the new year strongly and is on course to achieve its FY 2019 targets. Despite this, its shares still trade at just 11x estimated forward earnings and offer a generous trailing fully franked 5.4% dividend. Incidentally, its shares go ex-dividend for its 8 cents per share final dividend tomorrow.

Baby Bunting Group Ltd (ASX: BBN)

Another top option in the retail sector right now in my opinion is this baby products retailer. Although its shares have rallied strongly since the release of its full year results last month, I still see a lot value in them for patient long-term investors. Especially given that the company appears to have moved on from the headwinds that weighed heavily on its performance in FY 2018. I expect the closure of its competitors to result in strong market share gains and better margins for Baby Bunting over the medium term.

Super Retail Group Ltd (ASX: SUL)

This retail conglomerate could be a great option in the retail sector as well. In FY 2018 Super Retail returned to form with a 26% lift in net profit after tax to $128.3 million. The good news is that management expects another strong year from the company in FY 2019. It recently advised that each of its businesses had achieved positive like for like sales growth so far this year. So with its shares pulling back recently, now could be an opportune time to pick up shares.

Finally, here's a fourth retail share with a fast-growing dividend that could be worth snapping up today as well.

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You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

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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 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 Scott Phillips.

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