2 retail ASX shares Morgans rates as a buy now

It’s official: interest rates are going up. Is it time to consider these stocks representing household retailer brands?

| More on:
a woman looks at her phone while making a transaction at the counter of a store where racks of clothing can be seen in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With interest rates now heading north, it may be worthwhile taking a look at ASX shares representing retailers Australians just can’t live without.

After all, even if the economy slows down, consumers still have to eat food, wear clothes and have a drink.

The analysts at Morgans certainly thinks so, and are currently pretty keen on two particular retailer stocks:

‘A good entry point for longer term investors’

Wesfarmers Ltd (ASX: WES) owns an enviable stable of retail brands in Australia — Bunnings, Kmart, Target and Officeworks.

The share price has taken a beating just recently though, dropping more than 17% this year so far and almost 25% since August.

According to Morgans analyst Andrew Tang, this is a blessing in disguise.

“We see the recent pullback in the share price as a good entry point for longer term investors,” he said in Morgans Best Buys memo for May.

“The company is run by a highly regarded management team and the balance sheet is healthy.”

Staff shortages are admittedly a challenge for every business right now, but especially so for one of Australia’s biggest employers.

But Tang’s not worried about that in the long run.

“The core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes.”

Other analysts are torn about Wesfarmers shares.

According to CMC Markets, nine out of 15 are on the fence, labelling it a hold. There are four votes each on the buy and sell sides.

The retail giant does hand out a 3.42% dividend yield, as a nice sweetener for those who take the plunge.

Are Australians drinking at home or the pub?

Endeavour Group Ltd (ASX: EDV) runs big retail brands like Dan Murphy’s and BWS.

But it also has a hospitality division, which operates a large network of pubs around Australia.

While the retail business went gangbusters during COVID-19 lockdowns, Tang admits the hotels division suffered from low patronage.

But that just gives it plenty of upside for the coming period.

“With the Australian economy now largely reopened and we move into a ‘living with COVID’ environment, this should be positive for the hotels outlook.”

Endeavour did cop a short-term blow to its stock price on Tuesday as it announced that the managing director for Dan Murphy’s had departed to return to the UK.

The share price is still up more than 12% so far this year, and a pleasing 26.4% higher than it was 12 months ago.

Much like Wesfarmers, the wider analyst community is also divided on Endeavour.

According to CMC Markets, four out of 13 rate it as a strong buy with one other supporting it as a moderate buy. Four analysts each label it as hold and sell respectively.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

A blonde woman shows off her ring to two excited friends with Michael Hill Jeweller among the top ASX retail shares of FY22
Retail Shares

Top 5 outperforming ASX retail shares in FY22 that you may not have heard of

Small-cap ASX retail shares did better than the big end of town in FY22.

Read more »

Two happy woman on a sofa.
Retail Shares

Why I think the Temple & Webster share price is on sale right now

I believe it’s a good time to bring this ASX share home.

Read more »

A woman grimaces as she applies a clay beauty mask to her face.
Retail Shares

Why did the Adore Beauty share price sink over 70% in FY22?

What caused the ugly sell-off for this ASX e-commerce share?

Read more »

A young woman slumped in her chair while looking at her laptop and the tanking NDQ ETF share price on the ASX
Retail Shares

Down almost 30% in FY22: What’s worrying investors about Wesfarmers shares?

Why did the Bunnings operator fall so hard in FY22?

Read more »

A girl wearing yellow headphones pulls a grimace, that was not a good result.
Retail Shares

Down 16% in June: What put the JB Hi-Fi share price on sale?

Investors knocked almost a fifth off the price of this ASX retail share.

Read more »

A woman wearing a beauty mask on her face shrugs and looks unhappy.
Retail Shares

Why the Adore Beauty share price fell another 20% in June

The sell-off turned ugly for this e-commerce business last month.

Read more »

Woman checking out new laptops.
Retail Shares

How did ASX 200 retail shares perform in June?

Let's examine how the month just past treated ASX 200 retail shares.

Read more »

Worried ASX share investor looking at laptop screen
Retail Shares

Why did the Wesfarmers share price tumble 11% in June?

We check what was weighing on the conglomerate's stock last month.

Read more »