Lower inflation, interest rate relief, and stronger disposable income growth have boosted consumer confidence to three-year highs, Wilsons Advisory says. While that bodes well for all ASX-listed retail stocks, three stand out from the pack as presenting good value, the broker says.
In a note to clients issued this week, the broker says there are a number of tailwinds for stocks currently exposed to discretionary spending, such as retailers, fast food chains, travel operators, and consumer goods companies.
As a result, a top line recovery, easing input costs and operating leverage are set to underpin an upwards inflection in earnings across the sector. We saw a clear improvement in consumer spending throughout the August 2025 reporting season, with the latest trading updates from across the consumer discretionary sector showing accelerating sales momentum. In these early FY26 trading updates, median comparable same store sales growth sits at about 4%.
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Not all retail stocks are equal
But that doesn't mean all stocks in those sectors represent good value.
Despite these positive dynamics, current valuations are a challenge. Consumer discretionary companies, particularly in retail, have significantly re-rated and are trading at the highest point of at least the past two decades.
Wilsons has run the numbers on 20 companies in consumer discretionary sectors and found that the biggest names, Wesfarmers Ltd (ASX: WES) and JB Hi-FI Ltd (ASX: JBH), are trading at the least attractive valuations.
At the other end of the scale, the broker has singled out Universal Store Holdings (ASX: UNI), Autosports Group Limited (ASX: ASG), and KFC owner Collins Foods Ltd (ASX: CKF) as attractive buys, based on their current forward price-to-earnings (P/E) ratios and expected compound annual growth rates out to FY28.
Niche companies presenting value
On Collins Foods, Wilsons says the company, which operates more than 300 KFC outlets across Australia, the Netherlands and Germany, has "strong cash conversion, and significant long-term growth opportunities through store rollout – particularly in Europe''.
In addition, CKF's earnings are at an inflection point, with its earnings leveraged to a cyclical recovery in domestic consumer spending over the near-term. The business is already starting to benefit from a stronger consumer backdrop following successive rate cuts, positioning it for a recovery in top line growth and margins that will underpin strong earnings growth.
Regarding Autosports Group, Wilsons says the automotive dealer is "one of our highest conmviction small and mid-cap investment ideas''.
Autosports Group focuses on luxury new vehicle sales, "while also selling used vehicles, aftermarket parts and providing services''.
Wilsons says the company is well-positioned for growth as industry headwinds start to unwind.
And specialty youth clothing retailer Universal Store is attractive due to its strength in private brands, which have strong pricing power, Wilsons says.
Its most successful private label, Perfect Stranger, now has standalone stores, which are group margin drivers as they overwhelmingly sell private brands. Due to the success of in-house brands such as Perfect Stranger and Neovision, Universal Store's private label penetration has increased from 30% to 55% in the past five years, with further scope to increase.
Wilsons says spending among Universal Store's youth customer base has been resilient despite cost-of-living pressures.
