The famous adage from Peter Lynch, "Invest in what you know" is an investing tip I couldn't agree with more. Fundamentally, the premise is there's an edge in knowing a company's products and understanding its business model. However, applying this approach to retail shares can sometimes prove to be difficult.
Whether you're a programmer that's familiar with tech disruption, a doctor knowledgeable in medical developments, or in this case, a keen shopper — by being aware of the product/service and its competitors you can certainly improve your chances of investing successfully.
With that being said, retail shares can be a little tricky sometimes. The reason being the store name doesn't always align with the publicly-traded company name. This is because retail shares often own several brands all under one roof.
So, for those of you that popped into their local Westfield on the weekend like I did – here's a summary of the retailers you might have shopped at, with perhaps unfamiliar ASX and US-listed owners.
Sneakerheads, this one's for you
Sneakers have been a huge craze over recent years. For many, footwear is somewhat of a staple for self-expression. Whether it's the old school Vans, rugged Timberlands, or some fresh Air Force 1's, there's a good chance they came from Accent Group Ltd (ASX: AX1).
At the end of FY20, Accent had 519 stores across Australia. Scratching your head thinking "I've never bought sneakers from a store called Accent." Well, that's because Accent actually operates through 12 various brands. You might have heard of The Athlete's Foot, Platypus, Hype, Vans, Merrel, etc.
Accent has benefitted from a substantial lift in online orders stemming from COVID-19 lockdowns. First half FY21 digital sales increased by 110% compared to the FY20's first half. Furthermore, the company recently announced its plan to open an additional 90 stores by the end of this financial year.
ASX retail share for the more outdoorsy
More of an explorer, or a sportsperson? Was it a wander in the woods for the weekend, or an intense match on the fields? Two stores that are right up that neck of the woods are Macpac and Rebel. But you might not have known, they are owned by ASX-listed Super Retail Group Ltd (ASX: SUL).
The Super Retail Group also owns Supercheap Auto and BCF. Considering how much people have been cooped up, it's not surprising that Rebel experienced a 17.1% increase in like-for-like sales during the last half. Super Retail Group managed to grow earnings before, interest, tax, depreciation, and amortisation (EBITDA) by 95% in the period. Increasing EBITDA to $311.4 million for the half.
Further abroad retail brands
Not all brands happen to be Australian retail shares. Some of the most iconic and recognisable brands in Australian stores are owned by US-listed companies.
For example, maybe this weekend was a bit of an everything-shop. Grab the jocks from Bonds, throw in some new towels and bed sheets from Sheridan, maybe some undergarments for the women out there from Bras N Things. Would you believe that all of these brands belong to one company? That company is known as Hanesbrands Inc (NYSE: HBI).
Although not particularly well known in Australia, Hanesbrands did over $6.664 billion in revenue last year. Hence, the company is quite sizeable with a market capitalisation of US$7.17 billion.
Retail shares for the person who shops everywhere
Too many favourite stores to buy shares in all of them? Maybe there's a different approach to 'investing in what you know' when it comes to retail shares.
There's always the option of investing in the shopping centre that holds all of those companies. Not every shopping centre will be owned by a listed company, but with a bit of digging you should be able to find out whether it is or not. If you're like me and live near a Westfield shopping centre, it will be owned by Scentre Group Ltd (ASX: SCG). Other popular centre owners include Vicinity Centres (ASX: VCX), Stockland Corporation Ltd (ASX: SGP), and Aventus Group (ASX: AVN).
So when you next go shopping, I challenge you to explore what companies own your favourite brands. Are they listed or private? are they Australian or from overseas? At a minimum, you'll be more informed about the companies you purchase from, and at best there could be an investment opportunity in it.
