2 top ASX All Ords retail shares set for more outperformance: WAM

Up 31% and 61% in a year, these ASX retail shares look set for more outperformance in 2025.

| More on:
A little girls sings her heart out on stage with tinsel sparkling behind her, she is a star.

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

Two top ASX All Ords retail shares are set to outperform the All Ordinaries Index (ASX: XAO) again in the year ahead.

That's according to the small to mid-cap investment team – Sam Koch, Will Thompson and Cooper Rogers – at Wilson Asset Management (WAM).

The ASX All Ords shares in question are furniture retailer Nick Scali Ltd (ASX: NCK) and lighting specialist retailer Beacon Lighting Group Ltd (ASX: BLX).

Both stocks have already delivered outsized gains over the past year.

As of yesterday's close, Nick Scali shares are up around 31% over 12 months, while Beacon Lighting shares are up more than 61%.

And that's not including dividends.

Nick Scali shares trade on a fully franked trailing dividend yield of 4.8%. Beacon Lighting shares trade on a fully franked trailing yield of 2.7%.

Now, here's why WAM is optimistic about the outlook for both ASX All Ords shares.

ASX All Ords shares tipped for more growth

"For the past 30 years, Beacon Lighting has predominately sold light fittings, globes, ceiling fans and electrical to retail customers," small-cap analyst Will Thompson said.

WAM added:

A relatively new strategy is to sell to trade customers (electricians) who buy electrical goods on behalf of their clients. Over the past six years, trade revenues have grown from less than $30 million to over $100 million and

And Thompson thinks the ASX All Ords share can continue to grow revenues.

He's said he's impressed with Beacon's exposure to the trade sector because "it creates further operational leverage by increasing the potential revenue from each of its stores".

WAM noted that in recent years, the increase in trade sales has offset Beacon's subdued retail business sales.

And Thompson believes the company's retail business sales will return to growth in a more buoyant economic environment amid WAM's expectations that the RBA will start cutting interest rates in early 2025.

The asset manager noted that, "Traditionally, lower interest rates can result in more renovation and building activity."

Which brings us to Nick Scali.

WAM explained that the ASX All Ords retail share sells furniture in Australia through the Nick Scali and Plush networks. Nick Scali is now going global after purchasing Fabb Furniture in the United Kingdom in May.

According to WAM:

Within Australia, Nick Scali's ability to gain market share, increase margins and efficiently allocate capital is unparalleled to its peers in the Australian market. What has driven these strong margins is its ability to buy cheaply with scale from its suppliers.

Sam Koch said he believes that management will be able to emulate this model with Fabb Furniture in the UK.

If management executes on increasing margins through operational efficiencies and expanding the store network, Koch expects that there could be an upside to the valuation for the ASX All Ords retail share.

Motley Fool contributor Bernd Struben 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 Nick Scali. 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 »