One area of the market that has been performing strongly in FY 2021 has been the retail sector.
Thanks partly to the redirection of spending, stimulus, and tax cuts, a number of retailers have reported strong sales and profit growth.
Two retail shares that have been growing strongly and have been tipped as buys are listed below. Here's what you need to know about them:
Baby Bunting Group Ltd (ASX: BBN)
Baby Bunting is Australia's leading baby products retailer. It has been a strong performer in FY 2021, reporting financial year to date (to 2 October) comparable store sales growth of 17%. Impressively, this figure includes its Melbourne metropolitan stores which were impacted by lockdowns. Excluding these stores, comparable store sales would have been up 28.5% on the prior corresponding period.
Analysts at Citi are positive on the company and see a long runway for growth ahead. This is largely due to management's plan to almost double its store network from 56 stores to over 100 stores in the future. In fact, the broker sees opportunities for this number to increase thanks to opportunities in the New Zealand market. This will be a big positive as a greater size should provide it with increased buying power with suppliers and supply chain efficiencies.
Citi has a buy rating and $5.48 price target on the company's shares.
Universal Store Holdings Ltd (ASX: UNI)
Another retailer growing strongly in FY 2021 is Universal Store. The fashion retailer recently released a very strong trading update which revealed that it expects its underlying earnings before interest and tax (EBIT) to be in a range of $30 million to $31 million for the first half. This represents growth of between 61% and 67% on the prior corresponding period and was driven by strong like for like sales growth and gross margin improvements.
This update impressed analysts at Morgans. Particularly given how it performed strongly despite facing headwinds such as lockdowns and continued restrictions on youth events like music festivals. And with the company now cycling a weak six-month period from a year earlier, the broker sees scope for its second half EBIT to increase 125% on the prior corresponding period.
After which, Morgans is forecasting its earnings to grow at a 30% compound annual growth rate through to FY 2023. It feels this makes its shares cheap at the current level and has an add rating and improved price target of $6.93 on them.
