Leading broker names the ASX retail shares to buy in 2021

Bell Potter has named Domino's Pizza Enterprises Ltd (ASX:DMP) and this ASX retail share as the ones to buy in 2021. Here's why…

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Analysts at Bell Potter have been busy finding ASX shares from several industries that they believe are best placed to have a strong 2021.

On this occasion, I'm going to look at the retail sector. Here are a couple of shares they rate highly:

Accent Group Ltd (ASX: AX1)

The first retail share that Bell Potter is a fan of is Accent. It is the owner and operator of a number of footwear businesses in the performance and lifestyle side of the market. The broker has been very pleased with the company's performance during the pandemic and appears confident in its growth trajectory.

Bell Potter commented: "We believe management has steered the company exceptionally through the pandemic, underpinned by a quick adoption to online as top priority, successful negotiations with landlords/suppliers, effective cost management and the successful unwind of excess inventory."

The broker also notes that its valuation is undemanding given its strong position in the market.

"We believe AX1 has emerged as a stronger retailer across online capability, vertical product presence, rental terms, balance sheet strength, as well as levers to drive growth (store network and online). Based on these factors, we believe AX1's valuation is undemanding with FY21 PE of ~16x. AX1 also offers an attractive FY21 fully franked yield," it concluded.

Domino's Pizza Enterprises Ltd (ASX: DMP)

Another discretionary retailer that Bell Potter is fond of is Domino's. It is the largest franchisee outside of the USA and holds the Master Franchise licence to the pizza chain brand for Australia, New Zealand, France, Belgium, the Netherlands, Germany, Japan, Denmark and Luxembourg.

The broker notes that management has plans to double its store network organically over the next decade or so to 5,550 stores. In addition to this, it believes the company could accelerate its growth inorganically through acquisitions.

Bell Potter sees a lot of promise internationally for the company. It commented: "Amongst DMP's current territories, Germany and Japan are key large growth markets which continue to go from strength-to-strength. Germany is now leveraging off TV advertising under one brand, with rising brand awareness driving market share growth in a highly fragmented market. In Japan, DMP is successfully changing consumer habits towards more frequent pizza consumption rather than just seasonally."

"Overall, we believe DMP has significant long-term growth prospects with Europe, Japan and acquisitions the major drivers," it added.

Bell Potter has a buy rating and $99.30 price target on its shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group and Domino's Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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