Why these retail stars could be great investments

Afterpay Touch Group Ltd (ASX:APT) shares are one of three in the retail sector that I would consider buying today…

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The retail sector has not been an easy place to invest over the last few years.

The rise of online shopping, the invasion of international retail giants, and weak consumer sentiment have led to many retailers underperforming.

But not all retailers have struggled. In fact, a few have been growing strongly over the last few years and show little sign of slowing.

Three retail shares that I think could be great investment are listed below:

Afterpay Touch Group Ltd (ASX: APT)

One of my favourite shares in the retail space would have to be Afterpay Touch thanks to its disruptive buy now, pay later service which has been a winner with both consumers and retailers. Retailers love it because it has led to increased purchase sizes and improvements in other metrics, while consumers love it because they can spread out the cost of a purchase over several weeks interest free. The big test will be the U.S. market which it recently launched into. If American consumers take to the Afterpay service like Australian consumers have, then I believe there is significant growth ahead. However, with a fair bit of success already priced in, failure is not an option in respect to its share price.

Kogan.com Ltd (ASX: KGN)

Kogan is an e-commerce company that has really been making waves since its IPO. Impressive sales growth and the expansion into other verticals has led to both a strong financial and share price performance. While this does mean its shares trade on a sky-high earnings multiple today, I expect its earnings growth to justify this premium. However, like Afterpay Touch, if the expected level of growth fails to materialise, its share price could come tumbling down.

Premier Investments Limited (ASX: PMV)

Premier Investments is the company behind popular retail brands including Just Jeans, Smiggle, and Peter Alexander. It is the latter two brands that have really caught the eye in the last couple of years. Their impressive growth now means they account for almost half of its total revenue. Pleasingly, the strong sales growth looks set to continue for some time thanks to their ongoing popularity and their planned store expansion. I expect this to put Premier Investments in a position to continue growing its earnings and dividend at a solid rate for some time to come.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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