The team at Morgans has been reviewing the retail sector in the aftermath of earnings season.
Following the review, the broker highlights three ASX retail shares that it would buy right now. They are as follows:
JB Hi-Fi Limited (ASX: JBH)
The first retailer the broker is positive on is JB Hi-Fi. That's despite it forecasting lower than consensus earnings in FY 2023. It commented:
We have taken our FY23 EBIT margin assumption up from 7.3% to 7.5%, 10 bps lower than Visible Alpha consensus of 7.6%. This results in 3% higher NPAT at $483.6m, 3% lower than consensus of $496.6m. Lower peer multiples take our target price down from $53 to $48.
Morgans has an add rating and $48.00 price target on the retail share. This is meaningfully higher than the current JB Hi-Fi share price of $41.75.
Lovisa Holdings Ltd (ASX: LOV)
Unlike JB Hi-Fi, the broker is ahead of consensus with its estimates for this fashion jewellery retailer. Morgans is very positive on the company due to its global expansion and has recently called the company a phenomenon. In respect to its forecasts, the broker said:
We have increased the forecast LTI expense booked in 2H23 by $4m, following the indication from Lovisa that the second half expense is likely to be similar to that booked in the first half. Our FY23 NPAT forecast reduces by 7% to $74.3m, although we are still 2% above Visible Alpha consensus of $73.0m.
Morgans has an add rating and $29.00 price target on its shares. This compares to the latest Lovisa share price of $22.10.
Universal Store Holdings Ltd (ASX: UNI)
Finally, another ASX retail share to buy according to Morgans is youth fashion retailer Universal Store. Its analysts believe the company's shares offer material upside from current levels. The broker commented:
Our NPAT forecast increases by 5% to $30.4m, 1% lower than Visible Alpha consensus of $30.9m, due mainly to a downward adjustment in our forecast effective tax rate. Our target price reduces from $7.00 to $6.85 due to lower peer multiples in apparel.
Morgans' add rating and $6.85 price target compares favourably to the latest Universal Store share price of $4.90.
