There are a lot of options for Aussie investors to choose from in the retail sector.
But if I were to only choose one, it would be the ASX retailer in this article.
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Which ASX retailer?
The share in question is Accent Group Ltd (ASX: AX1).
It is a footwear and wholesaler which owns and operates a number of businesses in the performance, comfort and active lifestyle sectors.
These include multi-branded retailers such as The Athlete's Foot (TAF), Platypus, Hype DC, and Glue Store, as well as a number of mono-branded retail stores for Merrell, Skechers, Vans, Timberland, Stylerunner, Nude Lucy and more recently Hoka.
It has also just signed a major agreement to roll out the Sports Direct brand across Australia and New Zealand.
Accent has the rights to launch and operate the Sports Direct business (including online) in ANZ for an initial 25-year term. It plans for an initial roll-out of at least 50 Sports Direct stores over the next six years but ultimately sees an opportunity for 100 plus Sports Direct stores.
Why is it a share to buy and hold?
There are three key reasons why it could be a great buy and hold option.
One is its very positive growth outlook. The company has a significant store rollout opportunity and a history of solid like for like sales growth. Combined, the next decade looks like a very strong period for this ASX retailer.
Another reason is its cheap valuation. Based on Bell Potter's estimate for earnings per share of 13.4 cents in FY 2025, this ASX retailer is trading at just 13.65x earnings. This then drops down to just 10.8x estimated FY 2026 earnings based on current forecasts.
Clearly, if the company delivers on this, there's room for a significant re-rating of its shares.
The final reason is its dividend yield. Bell Potter is expecting fully franked dividends per share of 10.2 cents in FY 2025 and then 12.7 cents in FY 2026. Based on its current share price of $1.83, this equates to dividend yields of 5.5% and 6.9%, respectively.
Buy rating
Bell Potter currently has a buy rating and $2.60 price target on the ASX retailer's shares. This implies potential upside of 42% for investors over the next 12 months. It said:
We continue to view growth catalysts ahead for AX1 as Australia's market leader in footwear retailing, in core/new brands & regions, vertical brand strategy (~8% on owned sales) in addition to the sizable store roll-out opportunity of the global Sports Direct banner in Australia.
