Top 3 ASX Retail Stocks To Buy In November 2021
The ASX 200 closed lower on Wednesday, dropping 50.5 points or 0.68% to $7,369.90 and extending declines of 0.7% in the previous session. This was due to heavyweight banking names fell, while mining companies traded lower amid weaker iron ore and gold prices.
What moves the market today?
Among stocks, Commonwealth Bank of Australia (ASX: CBA) closed 8.27% lower after reporting earnings results, noting that fierce price competition in the home loan market was eroding its profit margins. Other financial stocks suffered, with Australia and New Zealand Banking Group (ASX: ANZ) down 2.23%, National Australia Bank (ASX: NAB) falling 1.51% and Westpac (ASX: WBC) down 1.63%.
Moreover, major mining stocks fell, with Rio Tinto (ASX: RIO) down 1.15%, BHP (ASX: BHP) falling 1.89% and Fortescue Metals (ASX: FMG) down 2.14%. Gold miners also traded lower, with Chalice (ASX: CHN) down 4.55%, Evolution Mining (ASX: EVN) falling 3.63%, Newcrest (ASX: NCM) shedding 2.16% along with Northern Star (ASX: NST) down 1.53%.
Get insights on ASX Retail Stocks from our experts.
Our List of ASX Retails Stocks to Buy Now
The market may be sliding lower today but the same cannot be said for some of the stocks we are presenting to you here:
Wesfarmers (ASX: WES)
The question we can ask ourselves right now is: Is Wesfarmers share price overvalued?
Wesfarmers or WES is a diversified business with broad business operations including home improvement and outdoor living, apparel and general merchandise, office supplies, and an industrial division with businesses in chemicals, energy and fertilisers, and industrial and safety products.
Earlier this month, Wesfarmers and API entered a scheme implementation deed where WES will buy all the API shares at a share price of $1.55 apiece. Wesfarmers currently owns 19.3% of the business already after buying 95.1 million shares last month. API’s board has unanimously recommended the deal to shareholders. The deal still needs to go through the process of shareholder approval.
Wesfarmers recently reported sales growth in Bunnings, Officeworks and Catch, while results in Kmart and Target have continued to be impacted by temporary store closures. Bunnings sales to customers have been strong. Whilst overall sales growth was being impacted by restrictions, we believe the businesses are well-positioned for the resumption of normal trade as restrictions ease. WES has seen strong sales growth across stores in affected areas that have re-opened. The trading performance in states and regions less impacted by restrictions has been “resilient” through FY22. Online sales have also remained “strong”, despite some capacity constraints. Over half of Officeworks’ year to date sales had been online, with online penetration in Kmart and Bunnings of 21% and 6% respectively.
Wesfarmers is also working on a market-leading data and digital ecosystem, investing in platforms for long-term growth and accelerating investment into improving the business.
In terms of the dividend, we think that at the current Wesfarmers share price WES is going to pay a grossed-up dividend yield of 4.6% in FY22.
Lovisa Holdings (ASX: LOV)
Lovisa Holdings or LOV is engaged in the retailing of fashion jewellery and accessories. The company’s geographical segments include Australia, New Zealand, Asia, Africa, Europe, and the Americas. LOV derives most of its revenue from Australia and NZ.
In early trade, the fashion jewellery retailer’s shares were up as much as 7% to a record high of $23.07. At the time of writing, the Lovisa share price is up by 5% to $22.75.
Based on the current Lovisa share price, this implies a potential upside of 10% even after today’s gains.
What exactly move LOV share prices? One of the catalysts is that Lovisa has announced the appointment of its new CEO, Victor Herrero. He will be replacing Shane Fallscheer, who is stepping down after 12 years leading the company. Mr Herrero was previously the Head of Asia Pacific and Managing Director Greater China for Inditex, the holding company of Zara, Pull & Bear and Massimo Dutti. He was also the CEO of Guess, and the CEO of Clarks before joining Lovisa. Furthermore, along with this new appointment, we positively see scope for the company to open as many as 1,400 stores. This provides Lovisa with a significant growth runway over the next decade and beyond.
The Lovisa share price is up almost 100% in 2021 following today’s gain.
Baby Bunting Group (ASX: BBN)
Baby Bunting or BBN operates as a nursery retailer in Australia. Geographically, BBN derives revenue from Australia.
There are a few ASX shares where a few analysts all believe that the business is good value. Actually, Baby Bunting is one of these stocks, and there is a good reason for that.
Baby Bunting is one of the leading retailers of baby products in Australia. It is also making moves to expand into New Zealand.
BBN reported comparable strengthening store sales. However, in the first seven weeks of FY22, comparative sales had been down by slightly 6.4%. Positively, on the other hand, excluding NSW and ACT stores, comparable-store sales grew by 4.7% to early October. Online sales including click and collect were up 37.7%, which was on top of an impressive 126% growth. The gross profit margin increased by another 120 basis points to 38.7%.
Baby Bunting is expecting to open between six to eight new stores in Australia. New Zealand should see atleast 2 new stores.
Finally, the company said that the transformation program is “progressing well” with an anticipated launch of its new Australian website. Phase two of the loyalty programme is also ongoing.
We come with a projected FY22 grossed-up dividend yield of 3.8%. At the moment of writing, BBN is trading at %5.80 per share.