Could this ASX All Ords share be set to benefit from higher living costs?

This company might be a winner as budgets buckle down…

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The silent killer of purchasing power, inflation, has been on full display in recent months. As rapidly ascending prices for goods and services push inflation to multi-decade highs, the remedy of higher interest rates has weighed on ASX shares. Although, a company featuring in the All Ordinaries Index (ASX: XAO) might buck the trend.

Best & Less Group Holdings Ltd (ASX: BST) is a value-oriented clothing retailer in Australia. Shares in the company have struggled since listing on the ASX last year. On a year-to-date basis, the Best & Less share price is down 36%.

However, there are hints that perhaps an inflationary environment can be a positive for companies like Best & Less.

Inflation-fighting within the ASX All Ords

Unlike other ASX-listed retailers, Best & Less focuses on value-conscious consumers. This strategy has proven well for the company over recent years, generating more than $600 million in revenue. But, this could be primed for a boost.

In November last year, data from Facteus indicated a 65% increase in discount store spending compared to the same time last year. Since then, inflation has worsened — hitting a 41-year high of 8.5% in March in the United States. Meanwhile, Australia reached its highest level since 2009 with an annual increase of 5.1%.

Furthermore, US discount giants Dollar Tree Inc (NASDAQ: DLTR) and Dollar General Corp (NYSE: DG) released positive earnings results in May. Both companies enjoyed double-digit increases in their respective share prices following the news.

In an interview with the US’s National Public Radio, Harvard business professor Willy Shih explained the phenomena, stating:

I think it says that a lot of people in this country are feeling the effects of inflation and they are looking for lower prices. And when you’re looking for lower prices, that’s one of the places you go, especially a place like Dollar Tree, where you now know that everything costs $1.25. So if I’m trying to save money, that’s probably a good place to go.

It is possible Best & Less is an ASX All Ords share that could similarly benefit. On 4 May 2022, the company revealed sales were ahead in the fourth quarter compared to the prior corresponding period. If more consumers look to cut household costs, a value apparel option such as Best & Less might see increased spending.

What else?

As my colleague Tristan Harrison covered, Macquarie is expecting Best & Less to dish out a decent dividend. If analysts at the investment bank are right, shareholders could land a dividend that equates to a grossed-up yield of 16%.

The Best & Less share price is currently fetching $2.64 per share.

Motley Fool contributor Mitchell Lawler 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 no position in any of the stocks mentioned. 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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