The recent ASX share market sell-off, caused by worries regarding tariffs, has opened up a number of possible cheap ASX share opportunities following sizeable declines across various sectors.
Most of these businesses still have the same operations and a similar outlook as they did a couple of weeks ago or even a couple of months ago.
In fact, I'd suggest the ASX retail shares have a more appealing outlook following the interest rate cut by the Reserve Bank of Australia (RBA) which saw the cash rate reduced by 25 basis points (0.25%) to 4.1%. This may give households with a mortgage more room in their budget to spend at stores.
With that in mind, let's look at two cheap ASX retail shares that could outperform on a three-year or five-year view, in my opinion.
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Adairs Ltd (ASX: ADH)
Adairs is a homewares and furniture retailer across three businesses – Adairs, Focus on Furniture, and Mocka.
The Adairs share price has fallen close to 30% since 17 February 2025, as the chart below shows.
The decline has occurred despite the company reporting a promising FY25 half-year result. I thought the results were positive, considering the high cost of living that Australians are facing. Further rate cuts by the RBA could be a major positive for the business.
For the first six months of the 2025 financial year, total sales increased by 2.7%, gross profit rose by 3.5%, underlying operating profit (EBITDA) climbed by 8.1%, and statutory earnings per share (EPS) grew by 9.7%. The company hiked its dividend by 30%, and net debt reduced by 1.5%.
Overall, the numbers were what shareholders want to see. Adairs' cost savings continued as a result of expense management, and improvements at the national distribution centre (NDC).
The company thinks it can make further improvements in efficiencies, particularly at the NDC. The company's near-term growth looks promising, with further store openings and strong sales growth. Group total sales were up 9.2% in the first seven weeks of the second half of FY25.
According to Commsec, the cheap ASX share is trading at 8.3x FY26's estimated earnings.
Accent Group Ltd (ASX: AX1)
This company acts as an Australian distributor for global footwear brands such as Ugg, Skechers, Hoka, Vans, Merrell, Herschel, and others. It's also going to act as the distributor of Dickies and Lacoste starting in FY26. The business has a number of its own businesses, including Platypus, The Athlete's Foot, Stylerunner, and others.
The Accent share price has dropped 26% since 28 January 2025, making it more attractive to me.
The company had a solid first half of FY25. Group sales (including franchisees) grew 4.2%, operating profit (EBIT) rose 11.5%, and net profit after tax (NPAT) rose 11.7% to $47.2 million. All of the numbers are going in the right direction, including the profit levels growing faster than sales.
While profit growth isn't guaranteed, it's pleasing to see the company's financials starting to improve again. It's planning to open at least ten new stores in the second half of FY25. Plus, like for like sales in the first seven weeks of the second half were up 2.2%.
According to Commsec, the current Accent share price is valued at around 10x FY26's estimated earnings. I'd call that a cheap ASX share valuation.
