'Affordable luxury': 2 ASX retail shares picked to benefit from higher migration

Emanuel Datt from Datt Capital reveals the ASX retail shares he thinks will do best over the coming years.

| More on:
Three happy shoppers.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors have been a little wary of ASX retail shares in 2023 in light of high inflation and interest rates.

But one expert thinks higher-quality retail stocks are likely to see an uplift over the coming years due to the benefits of population growth through massive immigration.

The latest data from the Australian Bureau of Statistics (ABS) showed a net overseas migration gain of 170,900 people in FY22.

This will balloon to a net gain of 400,000 in FY23, with another 315,000 net in FY24 (courtesy abc.net.au).

According to a statement from Migration Minister Clare O'Neil, the Government is increasing the number of migrant visas offered "to address parts of the Australian economy currently experiencing severe shortages, impacting the everyday lives of Australians".

Emanuel Datt from Datt Capital names two ASX retail shares he likes best for the coming few years.

They are diversified retail group Premier Investments Limited (ASX: PMV) and department store network Myer Holdings Ltd (ASX: MYR).

ASX retail shares to benefit from migration boost

In an interview on Ausbiz, Datt said the biggest factor over the next couple of years would be higher immigration inbound into Australia:

… [it's] a big increase, it's 3% of Australia's population and ultimately new immigrants will want an Australian standard of living which globally is one of the highest standards of living.

A number of sectors will benefit from this, first and foremost in our mind will be education, health, retail, and real estate.

Go for retailers that can pass on inflationary costs

Datt says he favours ASX retail shares that can pass on increased costs due to inflation.

Some retailers have more scope to do this due to the popularity and price point of their products and services or their unique business models.

Datt explains:

Names like Pacific Smiles Group Ltd (ASX: PSQ), which is a dental roll out. Everyone needs a dentist to stay healthy and it's a critical service. Obviously a growing company, so I think they do have that ability to pass costs through.

Other names would be retail names like Myer and Premier … as well. These are the sorts of businesses that I think provide what I would call affordable luxury.

Everyone likes to have the nice things in life but obviously no one wants to pay too much given the affordability out there. And I think these two particular companies are well placed to capture that [sic] demand we expect over time.

Why buy Myer shares?

Datt said Myer had changed the way it operated, with COVID forcing it to make a number of pivots in its business model.

He comments:

Over the years of lockdown that we've just come out of, Myer were actually able to develop a very strong online channel and marketplace and that has really added a string to their bow.

Ultimately with the retail industry as a whole, being able to control your costs of servicing the customer is very important.

Historical issues have slowly started to be fixed over time. The big historical issue with Myer was the amount of floor space in their retail stores, they had basically leased more space than they actually required to service their customers.

They've made significant headway in strengthening the business and future-proofing the business, in fact.

Myer shares closed 5.43% higher on Friday at 68 cents apiece. The ASX retail share is up 37% over the past year.

Created with Highcharts 11.4.3Myer PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Why buy Premier Investments shares?

Premier Investments owns popular brands like Smiggle, Dotti, Just Jeans, Portmans, and Jacqui E.

Datts says Premier is a best-in-class operator among ASX retail shares with an outstanding track record for growth and shareholder returns.

He comments:

Best-in-class retailer run by the best in the business in Solomon Lew and his team … it's had a pretty incredible growth trajectory over many years and I don't think I really see that slowing down.

… The team has proven that they're canny and definitely demonstrated they have the ability to make great returns through thick and thin.

[Premier has] got a really solid well-diversified portfolio and … it's continuing to grow. They've definitely demonstrated the ability to innovate as well.

Premier Investments shares closed down 0.94% on Friday at $22.03 per share. The ASX retail share is up 2.70% over the past 12 months.

Created with Highcharts 11.4.3Premier Investments PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

A happy young couple celebrate a win by jumping high above their new sofa.
Retail Shares

Overinvested in Wesfarmers shares? Here are two alternative ASX retail stocks

These stocks could complement an investment in Wesfarmers.

Read more »

Happy shopper at a clothes shop.
Retail Shares

The share price of this All Ords stock has jumped higher again. Here's why

Here's why Myer's share price is outperforming.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

Can Lovisa's new high profile CEO take Lovisa shares to new heights?

Is Lovisa about to embark on a new era of growth?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

After soaring 244% in 5 years, how much further upside does Macquarie tip for Nick Scali shares?

The broker's expectations remain steady.

Read more »

Girl with make up and jewellery posing.
Retail Shares

Buying the dip: $5,000 invested in Lovisa shares a month ago is now worth…

It's been an outstanding first month for new Lovisa shareholders.

Read more »