Are you interested in investing in the retail sector? If you are, you may want to look at the ASX retail shares that Bell Potter has tipped as buys for 2022.
Here's what the broker is saying about the sector and these shares:
Image source: Getty Images
Retail outlook
Bell Potter has concerns over the retail sector due to a number of factors. However, that doesn't mean that some retail shares don't have the potential to generate strong returns for investors.
Commenting on its concerns, the broker said: "We are cautious on the lookout for discretionary retailers based on several factors. These include: 1) emerging inflationary pressures and the prospects of rising interest rates; 2) the expected ramp-up of international travel in CY22, which will reduce share of wallet to retailers; and 3) ongoing risks surrounding the pandemic."
Nevertheless, the ASX retail shares that Bell Potter believes are in the buy zone are as follows:
Accent Group Ltd (ASX: AX1)
Bell Potter is a fan of this leading footwear-focused retailer and has a buy rating and $3.05 price target on its shares. The broker believes Accent's shares trade on undemanding multiples and offer a generous yield.
It commented: "The company's recent AGM update indicated strong forward momentum, including a material upgrade in expected store openings in FY22, a turnaround in Glue Store, continued sales traction in Stylerunner which we believe offers material growth prospects, and the signing of a new exclusive distribution agreement for Reebok. AX1's valuation is undemanding with FY23 PE of ~14x, and the dividend yield is an attractive ~5% (ff)."
City Chic Collective Ltd (ASX: CCX)
This plus-sized fashion retailer is another the broker likes. It currently has a buy rating and $7.40 price target on City Chic's shares.
Bell Potter explained: "[City Chic] is a collective of customer-led brands including City Chic, Avenue, Evans, CCX, Hips & Curves and Fox & Royal. Following CCX's recent acquisitions of Evans and Navabi, the company now has four high traffic online platforms across four key markets. These include City Chic in ANZ, Avenue in the USA, Evans in the UK and Navabi in Europe (primarily Germany, France and the UK). CCX also recently announced multiple new marketplace partnerships with major retailers across all key regions. With this foundation, plus >$60m in net cash available to acquire additional brands/ businesses, we believe CCX is well placed to grow market share globally."
Propel Funeral Partners Ltd (ASX: PFP)
Finally, the broker is positive on this funerals company due to its defensive qualities and an expected volume recovery post-pandemic. Bell Potter has a buy rating and $5.00 price target on the company's shares.
It commented: "Based on a proven growth strategy, the leadership of an experienced management team and with a strengthened balance sheet in place (post recent equity raise), we believe PFP is well positioned to drive further industry consolidation. PFP also stands to benefit from the attractive industry fundamentals, including the positive long term trend in case volumes underpinned by an ageing population, the industry's highly defensive attributes and the relatively high barriers to entry."
