The retail sector as a whole is finding it difficult to grow revenue and profit, just look at Woolworths Limited (ASX: WOW), Wesfarmers Ltd (ASX: WES) and Dick Smith.
The increasing competition from international arrivals is changing the retail landscape permanently due to competition from the likes of Aldi and Costco as well as the impending arrival of Amazon and perhaps Lidl.
However, there are still a retail few stocks that are growing and have the potential to grow for years to come. If you want to buy some retail stocks for Christmas to start 2017 with a bang, here are three I'd put in the stocking:
RCG Corporation Ltd (ASX: RCG)
RCG is the owner of The Athlete's Foot and distributor of brands like Vans and Skechers, it has a market capitalisation of $725 million.
In FY16 it grew store like-for-like sales by 3.5% and earnings before interest, tax, depreciation and amortisation by 3.8%.
Consumers are becoming more willing to buy products online, which spells trouble for bricks-and-mortar stores. However, people like to try on shoes to make sure they fit properly and feel nice. Luckily, all of RCG's sales are shoe related.
RCG is trading at 15.1x FY17's estimated earnings with a grossed up dividend yield of 5.86%.
Retail Food Group Limited (ASX: RFG)
Retail Food Group is the $1.1 billion master franchisor of chains such as Gloria Jean's, The Coffee Guy, Crust Gourmet Pizza and Donut King.
Its network is currently 2,500 in size and it has plans to grow to 3,500. A lot of this growth will be overseas as it expands in the USA and China.
Retail Food Group recently reaffirmed its forecast for 20% growth in net profit after tax for FY17.
This means the shares are trading at 15x FY17's estimated earnings with a grossed up dividend yield of 6.24%.
Greencross Limited (ASX: GXL)
The owner of Greencross Vets, Petbarns and Cityfarmers has a market capitalisation of $750 million.
The Greencross Vets side of the business has been tracking along nicely and can't be replaced by online retailing, but the Petbarn business is more vulnerable.
Greencross are planning ahead by expanding their website and co-locating a Greencross Vet and Petbarn in the same building, which will allow for effective cross-selling.
Greencross is trading at 16.6x FY17's estimated earnings with a grossed up dividend yield of 4.04%.
Foolish takeaway
The retail business is difficult to succeed in, but the above businesses are showing it's possible.
Out of the above three businesses at the current prices, I think Retail Food Group and Greencross look worthy of putting in my Christmas stocking.
