If I could only own 1 ASX retailer for the next 5 years it would be this one

This stock could be a great long term pick according to one leading broker.

| More on:
person sitting at outdoor table looking at mobile phone and credit card.

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

sdf

There are a lot of options for Aussie investors to choose from in the retail sector.

But if I were to only choose one, it would be the ASX retailer in this article.

Which ASX retailer?

The share in question is Accent Group Ltd (ASX: AX1).

It is a footwear and wholesaler which owns and operates a number of businesses in the performance, comfort and active lifestyle sectors.

These include multi-branded retailers such as The Athlete's Foot (TAF), Platypus, Hype DC, and Glue Store, as well as a number of mono-branded retail stores for Merrell, Skechers, Vans, Timberland, Stylerunner, Nude Lucy and more recently Hoka.

It has also just signed a major agreement to roll out the Sports Direct brand across Australia and New Zealand.

Accent has the rights to launch and operate the Sports Direct business (including online) in ANZ for an initial 25-year term. It plans for an initial roll-out of at least 50 Sports Direct stores over the next six years but ultimately sees an opportunity for 100 plus Sports Direct stores.

Why is it a share to buy and hold?

There are three key reasons why it could be a great buy and hold option.

One is its very positive growth outlook. The company has a significant store rollout opportunity and a history of solid like for like sales growth. Combined, the next decade looks like a very strong period for this ASX retailer.

Another reason is its cheap valuation. Based on Bell Potter's estimate for earnings per share of 13.4 cents in FY 2025, this ASX retailer is trading at just 13.65x earnings. This then drops down to just 10.8x estimated FY 2026 earnings based on current forecasts.

Clearly, if the company delivers on this, there's room for a significant re-rating of its shares.

The final reason is its dividend yield. Bell Potter is expecting fully franked dividends per share of 10.2 cents in FY 2025 and then 12.7 cents in FY 2026. Based on its current share price of $1.83, this equates to dividend yields of 5.5% and 6.9%, respectively.

Buy rating

Bell Potter currently has a buy rating and $2.60 price target on the ASX retailer's shares. This implies potential upside of 42% for investors over the next 12 months. It said:

We continue to view growth catalysts ahead for AX1 as Australia's market leader in footwear retailing, in core/new brands & regions, vertical brand strategy (~8% on owned sales) in addition to the sizable store roll-out opportunity of the global Sports Direct banner in Australia.

Motley Fool contributor James Mickleboro has positions in Accent Group. 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 Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

a bearded man with a big smile wearing a bright red apron holds a knife in one hand and a big slab of cheese in the other as though he is about to slice it.
Consumer Staples & Discretionary Shares

What's the upside for Bega shares according to Macquarie?

This broker sees room to grow for this Aussie consumer staples company. 

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

How much upside does Macquarie see for Collins Foods shares?

The company is scheduled to report on 24 June.

Read more »

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price.
Broker Notes

JP Morgan upgrades Domino's Pizza shares

Does the broker expect things to turn around?

Read more »

A block of cheese with grated cheese on top.
Consumer Staples & Discretionary Shares

Macquarie expects 20% upside for this ASX All Ords consumer staples stock

This week, Macquarie initiated coverage on Bega Cheese with an outperform rating.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Consumer Staples & Discretionary Shares

Why are Cettire shares crashing 27% today?

Things aren't looking good for this online luxury products retailer.

Read more »

Young lady in JB Hi-Fi electronics store checking out laptops for sale
Consumer Staples & Discretionary Shares

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Here’s what this broker has to say about these consumer discretionary companies. 

Read more »

Happy couple doing grocery shopping together.
Consumer Staples & Discretionary Shares

What does Macquarie think Woolworths and Coles shares are worth?

Should investors be interested in supermarket stocks?

Read more »

A man looking at his laptop and thinking.
Broker Notes

Up 17% in 2025, how much more upside does Macquarie tip for Metcash shares?

Following Tuesday’s merger and earnings news, Macquarie changed its rating for Metcash shares.

Read more »