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3 quality retail shares on my shopping list

I think the Australian retail sector is a great place for investors to look for value right now.

Three great value retail shares that I would consider buying this week are listed below. Here’s why they are on my shopping list:

Accent Group Ltd (ASX: AX1)

Accent Group, formerly known as RCG Corporation, is the company behind brands including The Athlete’s Foot and HYPEDC. Its shares are currently changing hands at 16.5x estimated FY 2019 earnings, which I think is great value considering the strong growth it exhibited last year. In August Accent Group posted a 17.9% increase in full year net profit after tax to $47.1 million. This solid result was driven by solid online and like for like sales growth. Furthermore, FY 2019 has started well and the company is tracking ahead of its like for like sales growth targets.

Adairs Ltd (ASX: ADH)

Adairs is a home furnishings retailer which returned to form in FY 2018 with strong profit growth. Thanks to the success of its focus on large homemaker stores, its Linen Lovers loyalty program, and strong online sales growth, the company delivered a 45.4% increase in profit to $30.6 million. The good news is that FY 2019 has started well and the company is on course to achieve its targets. Because of this, I think its shares are in the bargain bin at just 13x full year earnings.

Baby Bunting Group Ltd (ASX: BBN)

This baby products retailer has had a disappointing 18 months due to the impact of clearance sales from the closure of four of its biggest competitors. Pleasingly, conditions have now eased and Baby Bunting appears well-positioned to benefit from the low levels of competition. One broker that agrees is Morgans. It declared Baby Bunting’s shares as a buy (add rating) yesterday on the belief that it could become a category killer. Morgans believes the retailer could grow its market share from 12.6% to 20% and increase its margins meaningfully in the coming years.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. 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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