Retail was the 'shock performer' of the August earnings season, according to Wealth Within senior analyst Filip Tortevski.
Many ASX retailers surprised analysts and investors with higher sales and improved margins despite Australia's subdued economy.
Tortevski said (courtesy The Australian):
Consumer discretionary was the shock performer.
Not just because shoppers spent more, but because retailers like Coles Group Ltd (ASX: COL), Harvey Norman Holdings Ltd (ASX: HVN), and Super Retail Group Ltd (ASX: SUL) squeezed every cent through margin management, AI efficiencies, and cost cuts.
Investors rewarded the companies, with ASX retail shares rising at almost three times the rate of the S&P/ASX 200 Index (ASX: XJO).
The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) lifted 7.4% while the ASX 200 increased 2.6% last month.
Top broker Macquarie said the consumer discretionary sector beat consensus expectations by an average +2.9%.
Among ASX retail shares, the broker said there were net positive earnings per share (EPS) surprises of +25%.
Macquarie said: "Australia's real consumer spending continues to accelerate, supporting growth in consumer stocks."
Tailwinds for ASX retail shares today include lowered interest rates and improving household spending.
Macquarie commented that shoppers are "getting their mojo back", adding:
RBA rate cuts have historically led to stronger spending, and so we should expect real consumer spending to continue to accelerate.
Image source: Getty Images
Are you considering ASX retail shares for investment?
If you're looking for investment inspiration, here are some ASX retail shares that the experts say should deliver strong price growth.
Harvey Norman Holdings Ltd (ASX: HVN)
The Harvey Norman share price is up 1.4% to $7.45 on Friday.
The furniture and electronics retailer revealed a 39% jump in reported profit before tax of $753.1 million for FY25.
Harvey Norman chair, Gerry Harvey, said:
The FY25 result is a testament to the strength of our diversified business model and the disciplined execution of our long-term strategy.
We've delivered solid growth across all core segments, driven by strong franchisee performance, the resilience of our property portfolio, our measured global expansion, and continued investment in digital transformation and in-store innovation.
Post-report, Bell Potter retained its buy rating on this ASX retail share and raised its price target significantly from $6 to $8.30.
In a post-results note, the broker said:
Harvey Norman (HVN)'s FY25 saw beats across all three divisions, with the Australian Franchising division seeing the fastest growth to drive the largest beat.
The month of July in FY26 has started at a very strong level of +9.9% in overall aggregate sales with Australia franchisee headline comparable sales growth at +6.4% (+3.3% in the pcp) and all other regions (led by Ireland and New Zealand) tracking at positive comps driven by Home & Lifestyle and Mobile, Computer Technology & Electrical categories.
Temple & Webster Group Ltd (ASX: TPW)
The Temple & Webster share price is up 2.5% to $22.96 on Friday.
The ASX retail share hit a new record of $29.06 after the online furniture company reported a 500% profit explosion for FY25.
Temple & Webster said:
With anticipated interest rate reductions, coupled with stimulatory government policies relating to housing, we remain optimistic that conditions in FY26 should be favourable for the furniture, homewares and home improvement categories.
That stimulatory policy includes the universal 5% first home buyer deposit scheme, which will start earlier than expected on 1 October.
Macquarie has an outperform rating and a price target of $31.30 on Temple & Webster shares.
Analyst James Wilson commented:
We maintain our Outperform rating — seeing momentum from accelerating sales and earnings growth (greater active customers, greater conversion, increased revenue per customer, further operating leverage, and an onmarket buyback).
Light & Wonder Inc CDI (ASX: LNW)
The Light & Wonder share price is up 3.6% to $135.79 on Friday.
Light & Wonder reported an 8% lift in net profit after tax and amortisation (NPATA) to US$252 million in its half-year FY25 results.
Macquarie has an outperform rating on this ASX retail share with a price target of $180.
The broker said:
Light & Wonder expects a sole primary ASX listing by the end of November 2025 and will delist from the NASDAQ.
The company will remain domiciled in the US continuing to report quarterly.
With Australia set to take price discovery, using Aristocrat Leisure Ltd (ASX: ALL) as a valuation proxy trading on 26x 12m fwd P/E, Light & Wonder may be worth A$295/sh, 120% upside (vs. 12.5x P/E currently), albeit a valuation discount is likely.
Flight Centre Travel Group Ltd (ASX: FLT)
The Flight Centre share price is up 0.6% to $12.43 on Friday.
The ASX 200 travel company reported a 10% year-over-year fall in underlying profit before tax to $289.1 million for FY25.
The company achieved a record total transaction value (TTV) of $24.5 billion, up 3% year over year.
Macquarie has an outperform rating on this ASX retail share with a price target of $16.55.
In a post-report note, the broker said:
While profit disappointed, both segments delivered solid TTV growth which should accelerate if macro conditions are more supportive.
Valuation is attractive, and we see material upside to the current share price over a 12m view.
Further reading on ASX retail shares
You can access all the financial reports from key ASX retailers here.
