Here are 4 awesome ASX retail stocks to buy in FY25 … and 4 to sell

Nick Sundich Nick Sundich, June 27, 2024

Here are 4 ASX retail stocks to buy in FY25!

 

Universal Store (ASX:UNI)

Universal Store is most poised to benefit from the Stage 3 tax cuts more than any other retailer. This is because the fashion chain’s target market is Millennial and Gen Z customers. The revised Stage 3 tax cuts is far more favourable to them than the previous package, providing them with more spending power. Despite the stereotype of them not having money, the Taylor Swift tour shows that they can spend when they want to. And with more money in their pocket, Universal could well be a beneficiary. For FY25, analysts call for $313.5m in revenue (up 10%) and an NPAT of ~$30.7m, up 25% on the 2 years prior.

 

Beacon Lighting (ASX:BLX)

Another sector that could see a lot of the money saved from the Stage 3 tax cuts is home improvements. And this is why Beacon, a seller of lights and fans to retail and trade customers, makes this list. The sector has been struggling with supply chain issues, but this company is a vertically integrated business that controls its own chain. Since listing on the ASX a decade ago, Beacon has not raised a cent in capital and is still 55% owned by the Robinson family.

In the longer term, the company is hoping to capitalise on broader trends in the lighting industry, like sustainability and energy efficiency. We think the latter will be relevant given the current highs in electricity prices. We also think that Beacon can continue to expand in Australia and overseas.

 

Myer (ASX:MYR)

Much of Myer’s 15-year tenure on the ASX has been a disaster. But earlier this week, the company unveiled its biggest plans in decades. The company plans to buy Premier Investments’ Apparel Brands division (which includes Portmans, Jacqui E and Dotti brands). Although this is not a done deal, the company saw enough potential in this idea to reveal it to shareholders. Another potential catalyst – new CEO Olivia Wirth came from Qantas Loyalty, so she knows a thing or two about loyalty programs, and no doubt will improve the current loyalty program over time.

 

Wesfarmers (ASX:WES)

Yes, this is an obvious pick in the retail space. Wesfarmers is a conglamorate that has interests in retail, industrials, chemical and fertilisers. The company’s most famous holdings include Bunnings, Officeworks, Kmart and Target. But it also hosts a chemicals and fertilisers business, an industrial and safety products business, a joint-venture mining operation at the Mt Holland lithium project in WA, as well as other consumer facing businesses, buying Priceline owner Australian Pharmaceutical Industries (ASX:API) in 2022 and bidding for Silk Lasers (ASX:SLA) last year. It is Bunnings that is the biggest earner, however. And like Beacon, we think it could be a beneficiary of the tax cuts.

 

Here are 4 ASX retail stocks to avoid in FY25!

 

Bapcor (ASX:BAP)

Why would you buy any retailer (or any company for that matter) that had a CEO depart two days before he was meant to start? In our view, that should be enough.

Bapcor sells and distributes vehicle parts, accessories, automotive equipment and services and solutions in Australia, New Zealand and Thailand. It is best known for its Autobarn stores, of which there are 130 in Australia, along with other brands, including ABS and the Shock Shop. FY24 has been a tough year with margin pressures from cost inflation, increasing payroll taxes, depreciating costs and interest rates.

Sometimes, short-term declines in large-cap stocks are a chance to ‘buy the dip’. But there needs to be evidence things are turning around, and there is not any right now other than the company saying it is taking action.

 

Baby Bunting (ASX:BBN)

After proving itself resilient to the onset of the pandemic, high inflation has hit the company. Although you would think new parents wouldn’t be able to defer their purchases, what hadn’t been accounted for is that cheaper alternative retailers exist. You can get the very same goods elsewhere, but with less of an impact on the hip pocket. And more importantly, BBN has been unable to pass on cost increases – especially freight charges and forex movements.

 

Cettire (ASX:CTT)

Cettire is a high-end eCommerce retailer. It has shed more than half its market cap in CY24 as margins take a hit and consumers question various aspects its business model, not to mention why they should buy when the CEO keeps selling. Enough said.

 

City Chic Collective

The plus size fashion retailer just completed an emergency $27.5m capital raising, more than half of which will be used just to repay debt to its lender NAB. Trading conditions have proven very difficult, and the company has had a glut of inventory that it has been unable to clear, even with discounting. The only reason you’d buy the company in FY25, is if you think private equity will come in and buy it out. Good luck with that, because there’s no other reason to choose this company over others.

 

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

 

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