Morgans has been running the rule over the retail sector this month following a review of earnings season. This has seen the broker pick out a number of ASX retail shares as "key picks." But before we look at these shares, let's hear what the broker is saying about the sector.
Morgans notes that it was a mixed earnings season for companies. It said: Through August, we saw investors generally become more positive on the outlook for the consumer, with a recovery in sales towards the backend of FY24 and continuing a positive trajectory into the first couple of months of FY25. Share prices were volatile though, with notable stand out performers and laggards.
Sales were in line with forecasts and up yoy, but earnings were down driven by inflationary cost pressures, although better managed than expectations. But one positive was that retail shares paid out better than expected dividends, which the broker believes is a boost to confidence. It adds: Dividends in FY24 were much better than expected which may indicate that companies are confident in the stability of earnings and cash flow despite no meaningful sign of a recovery in earnings yet.
Generally, companies reported a positive start to the year, albeit comping a weak corresponding period. However, they did undershoot our expectations, resulting in lowering our EPS forecasts by (2.4)% (median).
Which ASX retail shares could be buys? Morgans has named three ASX retail shares as key picks. The first is specialist retailer ( ), wh.