The retail sector is known a one of the most cyclical sectors out of all of the industries.
Australia's retail sector hasn't had many problems over the last two or three decades. Australia has been recession-less, as far as GDP growth goes. Therefore, it could be argued that Australia's 'cycle' is still going but the music will stop at some point.
Some retail shares could be hit quite hard if a recession does happen. Electronics and furniture purchases can be delayed for a year or two if budgets are tight, which is why shares of JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) could be at risk if there's an economic dip.
I don't like trying to time or predict markets, I'd rather invest in shares that can grow throughout any economic cycle.
I think these two retail shares could be the most recession-proof shares on the ASX:
Bapcor Ltd (ASX: BAP)
Bapcor is Australia's largest auto parts business. Its main source of earnings is delivering parts to mechanics, with a service standard delivery of under two hours.
Car owners usually only need to replace a car part when it breaks. If there's a recession car owners would want to make their cars last longer before buying a new car. That means Bapcor could generate more earnings in a recession.
Bapcor could be a market-beating opportunity because of how strongly it could grow its profit over the next couple of years. Bapcor has acquired a few different businesses recently and is integrating them into its structure. Management have an excellent record of growing profit margins with acquired businesses.
It's currently trading at 24x FY17's estimated earnings, which I think is good value for how much profit growth it could announce next month.
BWX is Australia's leading natural beauty business. Its main range is called Sukin, which is delivering huge growth in Australia and overseas.
I think BWX is quite recession-proof because most consumers use its products every single day, meaning the business arguably has a good source of recurring revenue. Consumers don't often switch once they find a product that works for them.
Plus, Sukin is an affordable brand so it's unlikely that its users would change for a few dollars.
BWX could be a market-beating opportunity because of its recent acquisitions in the USA. The natural beauty industry is growing strongly and BWX has acquired two businesses that will help bring Sukin into the USA and those businesses should grow well themselves.
BWX is currently trading at 29x FY18's estimated earnings.
Foolish takeaway
I think both shares would make good additions to any portfolio. At the current prices Bapcor is probably trading at the better value in the short-term, but I believe BWX will go on to generate larger returns over the next five years.
