If you're looking for some exposure to the retail sector, then it could pay to listed to what Goldman Sachs is saying.
Its analysts have been busy reviewing the sector and have picked out ASX 200 retail shares that it feels are in the buy zone.
What did Goldman say?
Goldman highlights that November was a strong month for the retail sector after a subdued period. It said:
Bumper "Cyber Month" on consumer deal-hunting: After a muted 3mths of retail growth leading up to Nov, expectations for Black Friday, or rather "Cyber Month" due to earlier retailer activation this year, were high. BCG Consumer Survey of >1,000 consumers on November sales event spending intentions show 60% of consumers planned to purchase (vs 45% in 2021). Average spend of A$395 is +14% YoY. Early indication from Salesforce shows daily monitored online sales is up 3-15% YoY through Cyber week. Specifically, Black Friday was +15% sales, +7% in order volumes.
However, the broker believes that this may have been driven by a pull-forward of sales from December and January. This could mean softer sales for those months. It adds:
Despite a buoyant November, most industry participants expect the significant pull-forward of consumption to result in weak Dec/Jan YoY. Our channel check suggests still excess inventory in apparel/footwear but home goods/electronics is more right-sized. Looking into 1H24, we continue to expect negative sales for key brands of discretionary companies we cover.
In light of this, the broker is being picky when it comes to discretionary retailers.
Which ASX 200 retail shares does the broker like?
In respect to discretionary retailers, the broker believes that Breville Group Ltd (ASX: BRG) and Super Retail Group Ltd (ASX: SUL) shares are buys with price targets of $25.70 and $14.40, respectively.
The other two ASX 200 retail shares the broker likes are in the consumer staples space. They are Endeavour Group Ltd (ASX: EDV) and Woolworths Group Ltd (ASX: WOW). The broker has buy ratings on them with price targets of $6.40 and $42.40, respectively.
The broker explains:
In our domestic retail coverage, we continue to prefer WOW (Buy, A$42.4/sh TP), EDV (Buy, A$6.4/sh TP), BRG (Buy, A$25.7/sh TP) and SUL (Buy, A$14.4/sh TP) as our key Buy recommendations, due to quality execution with focus on increasingly targeted pricing/value for WOW and EDV, while BRG and SUL are in more resilient categories including high-end small appliance and sports/outdoor and have demonstrated quality execution to win share.
