ASX retail shares are pulling back on Friday after a strong day yesterday.
The S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.65% on Friday, and the S&P/ASX 200 Index (ASX: XJO) is down 0.66%.
ASX retail shares are underperforming, with the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) down 0.76%.
Yesterday, the Australian Bureau of Statistics reported a 'retail sales surge' in June.
The ABS said national retail turnover rose 1.2% last month, according to seasonally adjusted figures.
This follows a 0.5% rise in May after a flat April 2025.
The ABS said non-food related spending across all industries drove most of the increase in retail turnover.
The new retail figures follow better-than-expected inflation data for the June quarter released on Wednesday.
Looking ahead, the combination of contained inflation and expectations of further interest rate cuts bodes well for ASX retail shares.
7 ASX retail shares to buy now: brokers
In light of this potentially changing retail environment, let's examine a few ASX retail stocks with buy ratings today.
Step One Clothing (ASX: STP)
Step One Clothing shares are currently 69 cents, down 2.13%.
This week, broker Bell Potter maintained its buy rating on Step One Clothing but reduced its 12-month price target from $1.30 to $1.25.
The broker said the price target reduction reflected "Bell Potter's earnings revision outlook factoring in a delayed recovery in the consumer spend environment".
Accent Group Ltd (ASX: AX1)
The Accent share price is $1.50, up 0.47%.
Jabin Hallihan from Family Financial Solutions has an accumulate rating on this ASX retail share with a valuation of $2.11 apiece.
Hallihan said subdued demand has hurt the footwear retailer, but economic tailwinds suggest a potential rebound.
The analyst told The Bull:
Rising real incomes, recovering consumer confidence and anticipated interest rate cuts, possibly in August, paint a brighter outlook for discretionary retailers.
While recent demand has been soft, market sentiment may be under-pricing the turnaround potential.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa shares are currently $33.54, down 1.76%.
Morgans reckons Lovisa could continue to deliver double-digit earnings growth.
The broker notes the budget jewellery retailer's growing brand awareness and plans to open hundreds of new stores.
Morgans has given this ASX retail share an add rating and a $35 price target.
Harvey Norman Holdings Ltd (ASX: HVN)
The Harvey Norman share price is $5.81, up 0.086%.
In a new note, Macquarie gave Harvey Norman shares an outperform rating and increased its price target from $5.50 to $5.90.
The broker points out that a material portion of Harvey Norman's sales is linked to housing market conditions.
With lower interest rates already pushing up home values, and with more expected after this week's inflation data, the outlook is pretty bright for the property market.
Macquarie says Harvey Norman should benefit from "a more prolonged recovery across housing-related categories".
It says that potentially slower consumer electronics sales will be offset by higher 'whole-of-home' categories.
Eagers Automotive Ltd (ASX: APE)
Eagers Automotive shares are currently $19.90, up 1.43%.
Macquarie also likes car retailer Eagers Automotive for further share price rises, despite a 66% gain in FY25.
The broker has an outperform rating on this ASX retail share with a price target of $20.60.
Macquarie said:
We expect APE to achieve its larger than typical 2H skew.
The ST margin outlook has stabilised, and we see material upside to LT margins.
Offshore M&A and further rate cuts are material catalysts.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster shares are currently $24.75, up 1.12%.
Temple & Webster was the best-performing ASX retail share for price growth in FY25, soaring 127%.
Morgan Stanley is bullish on its outlook for the online furniture and homewares retailer.
The broker gives this ASX retail share an overweight rating and $28 price target.
Collins Foods Ltd (ASX: CKF)
Collins Foods shares are $9.23 on Friday, down 0.59%.
This company operates KFC stores in Australia and Europe.
Ord Minnett has maintained an accumulate rating on Collins Foods shares and raised its share price target from $8.50 to $9.50.
The fast food operator's FY25 earnings were "well ahead" of the broker's forecasts, driven by wider margins.
The broker said:
Generating wider second-half FY25 margin expansion in its Australian operations was an impressive result given the impact of Cyclone Alfred on Queensland, where circa 60% of the company's KFC stores are located.
Further reading on ASX retail shares
Check out the 5 fastest rising ASX 200 retail shares of FY25 here.
