What are the best ASX Consumer Stocks for FY25? Here are our top 5 picks!

Nick Sundich Nick Sundich, July 4, 2024

It is time to reveal our best ASX Consumer Stocks for FY25! We will be addressing both discretionary and staple stocks as one in this article as it has been an interesting year for these sectors. Plenty of discretionary stocks took a hit in the early parts of the year as consumer spending declined, although some have since recovered, buoyed by holiday trading. Although plenty of staple stocks haven’t fared that bad, some have seen margin hits due to inflation.

We think FY25 should be a solid year for consumer stocks, but think these 5 in particular will see good years.

 

The 5 best ASX consumer Stocks for FY25

 

Jumbo Interactive (ASX:JIN)

Jumbo Interactive (ASX:JIN) is a lotteries retailer and a provider of a SaaS platform that helps government and charity lottery operators do business.

It has a white-label SaaS platform for other lotteries around the world to utilise and grow their lotteries, particularly in the US and the UK. The company boasts over 2 million players from Australia and abroad. And with only 36% of lotteries having gone digital, there is more opportunity for Jumbo to capture at home and abroad.

We acknowledge investors may have ESG concerns over gambling and whether or not the industry has a future. But this company also services charity lotteries – launching a new fundraising initiative Jumbo Win for this purpose.

 

Universal Store (ASX:UNI)

Universal Store is a chain of casual fashion stores aimed at Millennial and Gen Z customers (think 18-35 year olds). Universal Store has 79 stores across Australia, which tend to be in major shopping centres, as well as a further 20 or so stores exclusive for particular brands like Perfect Stranger, and the group makes 14% of its sales online. Both curated third-party products and private brand products are sold in-house, although the former dominates.

It is a good business, but has been hit by perceptions that its customers will cut back their spending because they feel the brunt of the cost of living crisis. We think the recent Taylor Swift shows and the merchandise spent by them (estimated to be over $60m at the concerts alone) show that they will still spend when they perceive value.

In FY23, total Sales were up $263.1m, up 26.5% overall, although like for like sales were only up 1.2%. It made underlying EBIT of $40.4m, up 24% and an NPAT of $23.6m, up 15%. Not bad in the rising interest rate environment. This was because the company was better able to manage inventory and offset costs of doing business.

Consensus estimates for FY24 suggest $289.2m in revenue and a $28.4m profit (up 10% and 20%), followed by $320.2m in revenue and a $33m profit (up 11% and 16%). It seems analysts are optimistic for further growth in the next 12 months as the Stage 3 Tax cuts come into effect, and why not? The revised package will put more money into the pockets of Universal Store’s customer base.

 

Breville (ASX:BRG)

Breville is categorised as a ‘consumer discretionary’, but we think it is fair to say it is less discretionary than some others. This company is a premium kitchen appliances business with a presence in Australia, Europe and the Americas. Breville sells over $1.4bn in goods each year in over 100 countries globally and caters to middle to higher income earners.

It has had concerns from investors over the last couple of years including the potential impact of inflation on consumer demand, supply chain issues and the company’s inventory uplift (specifically the fears it could become as bad as Kogan). None of these have come to fruition.

Consensus estimates call for 8% revenue growth, 9% EBITDA growth and 10% profit growth in FY24. For FY25, analysts expect 10% revenue and EBITDA growth and 14% profit growth. Where will this come from, investors might ask? From further international expansion as well as the end of the rate hike cycle.

 

Wesfarmers (ASX:WES)

Wesfarmers is not just the largest ASX retail stock but the 10th largest company on the ASX. It owns several businesses both in retail and elsewhere, including in chemicals and fertilisers. We like this company most for Kmart and Bunnings, all of which are aimed at value-conscious consumers.

In 1HY24, it made $22.6bn in revenue, up 27% and a $1.4bn profit (up 14%) and CEO Rob Scott observed that consumers are turning to these brands in challenging times. Consensus estimates for FY24 call for $43.2m in revenue (up 1%), $5.7bn in EBITDA (up 3%) and a $2.55bn profit (up 4%). But FY25 is expected to see stronger growth with $45.7bn in sales (up 10%), $6.2bn in EBITDA (up 7%), and a $2.8bn profit (up 9%).

This isn’t the fastest growing company amidst ASX retail stocks by any means, but not all are as well positioned to record growth in the months ahead as Wesfarmers is. It yields a 3.76% dividend which isn’t inflation-busting, but you can trust that there’s little prospect that the company will reduce or stop paying dividends.

 

Temple & Webster (ASX:TPW)

Temple & Webster is an eCommerce furniture outlet that has grown substantially in the last decade – in good times and bad. It stands apart from its peers in many ways including: its own collection of home furnishings and décor, that aim to reflect customers’ personal style, its emphasis on sustainability and ethical production and its AI-powered tools such as The Studio that helps customers visualise how products would look in their own home using augmented reality technology.

We think the company can gain not just from Stage 3, but also from the increasing digitisation of the furniture shopping industry. We acknowledge it may never become a ‘majority eCommerce’ industry, but we still think there is room for growth based on the facts that penetration is higher in other countries, particularly the UK and USA where penetration is nearly 30% as opposed to under 20% here. This is projected to happen as millennials gradually become the largest spending cohort.

Temple and Webster aims to grow its revenue to $1bn+ over the next 3-5 years. In the shorter term, analysts expect that in FY25 it can grow its revenue by over 20% (to $613.4m) and its profit by 40% (to $8.3m).

 

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

Check our buy/sell tips

 

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