ASX retail shares have been through plenty of volatility over the past year or two. Some share prices have rebounded in the last couple of months, but I think there are still some bargains to be found.
Some households may have less money to spend in the current economic conditions following all of the inflation and interest rate rises.
Investor confidence in retailers is understandably lower than in 2021 when retail conditions were stronger. I think retailers are cyclical opportunities, so it's times like this that could be appealing to invest.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is a leading retailer of hair removal products in Australia. It has more than 120 stores across Australia and New Zealand.
In a trading update last November, the company advised its total sales for the financial year to date (1 July 2023) to 31 October 2023 were down 5.3% year over year. However, they were up 23.8% compared to FY20.
I think this shows that its sales are holding up fairly well, considering the tricky retail environment that households are facing. The company also revealed that its gross profit margins are "broadly consistent with the prior comparative period."
Shaver Shop is slowly but steadily growing its store network, increasing its ability to serve more customers around the country. It has a small but growing presence in New Zealand.
I believe demand for hair removal products will remain, even if the economy does go through a dip. Hair keeps growing, and shavers don't last forever.
Why is the ASX share cheap? Looking at the estimates on Commsec, it suggests the Shaver Shop share price is valued at under 10x FY24's estimated earnings, with a possible grossed-up dividend yield of 13%.
Accent Group Ltd (ASX: AX1)
Accent is an ASX retail share that sells shoes. It controls a number of its own brands, including The Athlete's Foot, Stylerunner, Nude Lucy and Glue Store. The business also acts as the distributor in Australia for many global brands such as Vans, Skechers, Kappa, Hoka, Dr Martens and Timberland.
The company is investing in growing its store network across its various brands and plans to open dozens of new stores in FY24.
Increased scale is useful for the retailer. It may help grow margins in the longer term, though the short term is challenging because of the difficult retail environment.
Households may be a bit less likely to buy shoes at the moment. However, many people are moving to Australia, and that adds to Accent's potential customer base, which will need to buy shoes in the future.
I think the company is doing well at expanding its presence in Australia, and it looks cheap at the current valuation. According to Commsec, the Accent share price is valued at 12x FY25's estimated earnings with a possible grossed-up dividend yield of 10%.
