At the start of each week, I like to look at ASIC's short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn't quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) has returned to the top of the chart after its short interest rose to 12%. Short sellers don't appear to be giving up on Flight Centre despite its return to form in FY 2023. Revenue margin headwinds may be a cause for concern.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease slightly to 11.6%. Competition and cash burn concerns could be weighing on this betting technology company's shares.
• Sayona Mining Ltd (ASX: SYA) has 10.7% of its shares held short, which is flat week on week. There are fears that lithium prices have now peaked and are about to decline materially.
• Core Lithium Ltd (ASX: CXO) has short interest of 10.1%, which is up week on week. As with Sayona Mining, continued weakness in spot lithium prices appear to have spooked investors.
• Megaport Ltd (ASX: MP1) has seen its short interest fall again to 9.3%. Short sellers have been targeting this network as a service provider after it reported softening operating trends with its results.
• Zip Co Ltd (ASX: ZIP) has short interest of 9.1%, which is up strongly week on week. Short sellers appear to be doubting this buy now pay later provider's ability to achieve its profitability goals.
• Liontown Resources Ltd (ASX: LTR) has short interest of 8.1%, which is up week on week. Concerns over material cost blow outs at the Kathleen Valley Lithium Project have been weighing on sentiment.
• City Chic Collective Ltd (ASX: CCX) has jumped into the top ten with short interest of 7.3%. This plus sized fashion retailer's abject performance and inventory management are likely to be behind this short interest.
• Lake Resources N.L. (ASX: LKE) has 6.9 % of its shares held short, which is flat week on week. Doubts over this lithium developer's technology and project funding are reasons why one short seller is targeting Lake.
• Vulcan Energy Resources Ltd (ASX: VUL) has short interest of 6.8%, which is down slightly week on week. This also appears to be down to lithium prices being tipped to fall materially in the next 18 months.

The post Here are the 10 most shorted ASX shares this week appeared first on The Motley Fool Australia.

We're nearing the official end of the February earnings season, but the excitement isn't over yet. Many All Ordinaries Index (ASX: XAO) shares are reporting this week, including three retailers each dropping earnings this morning.

And the market is reacting to their results in a big way. Let's take a look at the moves being made.

Right now, the All Ords is down 1.4% at 7,404.9 points.

3 All Ords shares making moves on half-year earnings

First up is the share price of All Ords online beauty retailer Adore Beauty Group Ltd (ASX: ABY). It hit a high of $1.075 today – marking a 4.9% gain.

Adore Beauty posted its earnings for the first half of financial year 2023 this morning, detailing $93.6 million of revenue – down 17% on that of the prior comparable period, which saw most of Australia locked down. Meanwhile, it revealed a $90,000 loss for the period.

The company also lowered its full year guidance, saying it no longer expects to see double digit revenue growth in the second half. That comes as inflation and waning consumer sentiment take their tolls.

Next, the share price of All Ords jewellery retailer Michael Hill International Ltd (ASX: MHJ) gained 4.4% to peak at $1.075 earlier today.

The company posted an 11% jump in half year revenue, sending it a record $363.4 million. It also declared a 4 cent per share interim dividend – up 14% year-on-year.

It expects its full year earnings before interest and tax to come in ahead of that of financial year 2022.

Making the biggest move of the three All Ords stocks is the City Chic Collective Ltd (ASX: CCX) share price. It plummeted 13.7% to a low of 50.5 cents earlier today.

As previously forecast, the plus size fashion retailer posted $168.6 million of revenue – an 8% fall as it cycled strong pandemic-related trading and struggled against lower consumer demand.

Its underlying operating EBITDA came to a $3.4 million loss while it posted a statutory net loss after tax of $27.2 million.

Looking beyond the first half, the company noted trading was down 17% year-on-year in the first seven weeks of the second half.

Though, it expects to deliver a positive net cash position by the end of this fiscal year. Currently, it has a $13.4 million net debt position.

The post 3 ASX All Ords shares on the move following results announcements appeared first on The Motley Fool Australia.

ASX small-cap shares may not be household names. They might not get the same media attention as the big S&P/ASX 200 Index (ASX: XJO) banks and miners.

However, some pint-sized ASX companies could turn out to be the big-cap stocks of the future. And wouldn't it be great to invest in a few during the relatively early stages of their growth stories?

But with so many tiny ASX fish in the sea, how can investors sort the future big catches from the minnows destined to forever remain small fry?

For their thoughts, we decided to open a can of worms and ask our Foolish writers which ASX small-cap shares they reckon are worth reeling in right now. Here is what they said:

6 best ASX small-cap shares for 2023 (smallest to largest)

City Chic Collective Ltd (ASX: CCX), $127.56 million

Healthia Ltd (ASX: HLA), $191.79 million

Adairs Ltd (ASX: ADH), $414.87 million

Arafura Rare Earths Ltd (ASX: ARU), $1.28 billion

Platinum Asset Management Ltd (ASX: PTM), $1.35 billion

GUD Holdings Limited (ASX: GUD), $1.40 billion

(Market capitalisations as at market close on 20 February 2023)

Why our Foolish writers love these ASX small-cap stocks

City Chic Collective Ltd

What it does: City Chic is an Australian-born, plus-sized fashion retailer. It boasts 200 locations around the globe as well as multiple online channels.

By Brooke Cooper: The last 12 months have been rough on the City Chic share price. It's dumped almost 90% since this time last year amid inventory concerns and balance sheet pressure.

But I believe most of the bad news could now be behind the company. City Chic recently revealed its inventory levels are expected to come in below guidance for the first half, while its recently-amended debt facility should support the company's financial position.

Goldman Sachs is neutral on the stock due to concerns around continuously-compressed margins and a promotion-focused customer base.

However, I'm not averse to risk so think the current City Chic share price could represent a buying opportunity right now.

Motley Fool contributor Brooke Cooper does not own shares in City Chic Collective Ltd.

Healthia Ltd

What it does: With over 300 clinics across Australia and New Zealand, Healthia describes itself as a leading, diversified allied healthcare provider.

The company operates networks of optometry, podiatry, and physiotherapy clinics and also owns iOrthotics, a leading manufacturer of custom-made and 3D-printed foot orthotic devices for podiatrists.

By Tristan Harrison: The Healthia share price has fallen by around 40% since the start of 2022, making it great value, in my opinion.

I think the business is exposed to a number of helpful tailwinds, including an ageing population and a growing potential market (helped by the resumption of immigration).

This small-cap ASX share is also relying on an acquisition strategy to boost its scale. It's also working on improving the performance and efficiency of its existing clinic network. Healthia is planning to spend at least $20 million on acquisitions in FY23.

FY23 half-year revenue is expected to grow by between 31.7% to 37.1%, with like-for-like revenue growth of 5.4%. January 2023 showed "positive momentum" as well.

Motley Fool contributor Tristan Harrison does not own shares in Healthia Ltd.

Adairs Ltd

What it does: Adairs is an ASX retailer that sells homewares like linens, furniture, and decor items. It operates 170 stores across Australia and New Zealand as well as a growing online channel.

By Sebastian Bowen: This is one ASX small-cap share I think could have a big future.

The Adairs share price has had a bit of a rough trot over the past year or two, having fallen by around 50% from its pandemic highs. But this could well present a buying opportunity.

The company is still growing healthily, posting record revenues for the first half of FY2023, which were up 34.1% over 1H22's numbers. Its online channels have also been booming, with roughly 26.5% of all sales over the half done over the internet.

Perhaps best of all, Adairs currently has a fully-franked trailing dividend yield of around 7.5% on the table today.

Considering all of this, Adairs could well be a small-cap ASX retailer to consider right now.

Motley Fool contributor Sebastian Bowen owns shares in Adairs Ltd.

Arafura Rare Earths Ltd

What it does: Arafura Rare Earths is the rare earths developer behind the globally significant Nolans Project in the Northern Territory.

By James Mickleboro: I think Arafura Rare Earths could be an ASX small-cap share to buy right now. This is because of the potential for the Nolans Project to supply a significant proportion of the world's neodymium and praseodymium (NdPr) demand in the future.

These are critical minerals in the production of high-performance neodymium magnets, which are used in everything from mobile phones and electric vehicles to wind turbines and military weapons.

And with the company expecting demand to more than double from 2020 to 2030, and supply to remain constrained, I believe Arafura looks well-positioned to benefit from strong prices once it commences production.

Motley Fool contributor James Mickleboro does not own shares in Arafura Rare Earths Ltd.

Platinum Asset Management Ltd

What it does: Platinum Asset Management is an Australian-based niche investment manager focused on international shares.

By Bernd Struben: After a tough 18-month stretch, the Platinum Asset Management share price has seen a big turnaround in 2023, up by almost 30% year to date. I like buying into strength and believe the company can deliver more gains in the year ahead.

Adam Lund, head of trading at Spheria Asset Management, recently tipped Platinum to outperform. He told Motley Fool, "When you buy Platinum shares, you are investing in a very experienced investment team that manages $18 billion across strategies that have outperformed their direct competitors over most periods."

Atop potential share price gains, Platinum pays a 7.8% trailing dividend yield, fully franked.

Motley Fool contributor Bernd Struben does not own shares in Platinum Asset Management Ltd.

GUD Holdings Limited

What it does: GUD Holdings is an Australian-based company that manufactures and distributes a diverse range of products in the automotive aftermarket and water industries. With a history spanning 65 years, GUD has raised a slate of trusted brands including Ryco Filters, DBA brakes, CSM, Cruisemaster, and Davey.

By Mitchell Lawler: GUD Holdings is not a flashy company touting futuristic software. However, it does meet a valuable need by providing a host of aftermarket car parts.

A growing berth of brands continues to fortify GUD's pricing power, reputability, and top-line growth. In the company's latest half-year results, revenue increased a significant 56% to $517 million.

What I find particularly attractive about this company is its exposure to non-discretionary spending. Around 80% of GUD's automotive revenue is derived from wear-and-tear/replacement parts. I believe this bodes well for the company, in conjunction with a large number of registered cars in Australia and the rising average vehicle age.

I personally think GUD's assets and growth potential are currently undervalued. At present, the company trades at around 11 times estimated FY2025 earnings.

Motley Fool contributor Mitchell Lawler does not own shares in GUD Holdings Limited.

The post Top ASX small-cap shares to buy in 2023 appeared first on The Motley Fool Australia.

Ask a Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part two of this edition, we're rejoined by Adam Lund, analyst, head of trading & co-founder, Spheria Asset Management.

Motley Fool: The Spheria Australian Smaller Companies Fund and Spheria Australian Microcap Fund focus on the smaller end of the market. How do you see small-cap ASX shares performing compared to the big blue-chips in 2023?

Adam Lund: Small-caps dramatically underperformed large-caps in 2022. It's an asset class that tends to underperform during periods of economic turmoil as sentiment turns negative and investors look to reduce the liquidity risk in their portfolios.

But the good news for 2023 and beyond is that smaller companies are also an asset class with a well-documented history of strong outperformance during market recoveries.

In recent months, we have been seeing some exceptional value in small-cap ASX shares and starting to add some fresh names to the portfolio.

Given the lack of coverage of small caps relative to large-caps, the inefficiency in this market is much greater than what you see in large caps. Particularly at times like this, that provides active small-cap managers an edge to outperform their large-cap peers.

MF: Which ASX shares are you most bullish about for 2023?

AL: One company we're positive on is City Chic Collective Ltd (ASX: CCX). It's a retailer of plus-sized women's apparel, footwear and accessories in Australia, New Zealand, the United States, Canada, the UK and Europe.

The recent weakness in the City Chic share price came with the market betting on a potential capital raise as the balance sheet looked to be under pressure. This saw the shares trading at close to asset backing.

The weaker retail environment and excess inventory position has forced increased promotional activity which resulted in further gross margin compression. The company is now expecting a small loss in the first half of 2023.

MF: The half-year loss isn't concerning?

AL: We're taking a longer-term view on this business. We think management can work through the currently elevated inventory levels to take the balance sheet from a net debt to a net cash position.

Much like The a2 Milk Co Ltd (ASX: A2M) [discussed in part one of this interview], we have a long history of investment with CCX. We previously owned a substantial position post its spinoff from Specialty Fashion, before divesting most of the position as the stock re-rated with the international growth of the business.

We now think it's a great time to reacquire a position in what is a sound business trading at a very attractive multiple, and where the risk/reward is skewed in investors' favour.

MF: Any other ASX shares you think will outperform in 2023?

AL: One other ASX share we like that might surprise some readers is listed funds management company, Platinum Asset Management Ltd (ASX: PTM).

It's perhaps one of the most under-owned stocks in the Australian market. But when you buy Platinum shares, you are investing in a very experienced investment team that manages $18.1 billion across strategies that have outperformed their direct competitors over most periods.

And you're getting that for nine times EBIT [earnings before interest and taxes], with a net cash balance sheet and strong cash flow generation.

MF: Platinum is also popular with some income investors.

AL: Right, PTM pays a 6.5%, fully franked dividend yield and provides investors with cheap beta in a market that has started 2023 with strong positive momentum.

Recently we've seen investors starting to appreciate that the team's performance may start to strengthen flows into their funds. Investor flows in and out of funds management companies is a metric they live and die by.

Additionally, one of the firm's founders, Kerr Nielsen, recently stepped off the board. So the question is, can we expect the overhang of his stock to hit the market as the shares recover? A sell-down would see a large index upweight which would mean a large flow of passive capital back into the name.

***

Be sure to check in tomorrow for part three of our fund manager interview series with Adam Lund. You can read part one right here.

(You can find out more about Spheria Asset Management's fund offerings here.)

The post Two 'attractive' ASX shares set to outperform in 2023: fund manager appeared first on The Motley Fool Australia.

Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Schroders portfolio manager Ray David urges investors to avoid the biggest mistake in investing.

The ASX share for a comfortable night's sleep

The Motley Fool: If the market closed tomorrow for four years, which ASX share would you want to hold?

Ray David: I'd say Ramsay Health Care Ltd (ASX: RHC), just because we know in four years' time, demand for elective surgeries will be higher. 

We know that demand for healthcare is only going to grow and the government's very supportive of that private healthcare segment of the market because effectively it's a tax subsidy for those that can afford it against those who can't. 

And there's a big freehold property infrastructure property network there. If we are in a different environment where rates are lower, the value of that property only goes up. 

So Ramsay would definitely fit that category if we were looking across the ASX because it's recession-proof, it's got growth, it's got high [barrier to] entry and the valuation is pretty attractive.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

RD: Our biggest headache we have is timing. Generally timing the top of a stock or the bottom, we can never get it right. 

I'll give you an example. We shorted a company called City Chic Collective Ltd (ASX: CCX). We shorted the stock when it had a valuation over $1 billion and the market was really excited about the prospects of its online business that we saw as a commodity. 

So we end up making 50% on the short. So we covered it around about $1.90 per share, because we started to think, okay, the valuation was starting to look pretty supportive. But often as always, the market can overreact both on the upside and the downside. And as you know, City Chic started to update the market around its inventory positions and outlook, stock fell to as low as, I think it might have been, 48 cents.

So we never get the bottom on the shorts and we never get the top on the longs. But the way we think about our investment framework is, if you have a valuation framework, you stick to that framework. It's a guide. If you remain disciplined to that process, you'll still be able to add a fair bit of return to your clients. 

You're never going to get the bottom of the top. And if you try and time the market, most likely you're going to be wrong, because there's so many psychological factors driving share prices in addition to fundamentals where stocks are going to be going much higher than what you thought as we saw in the tech boom.

Buy now, pay later is another example where a company like Zip Co Ltd (ASX: ZIP) got to north of $6 billion of market value and today it's got a market value of less than $500 million. 

So the market can be irrational and timing's very difficult, but the way to stay ahead of the market is for you to be rational and be disciplined and stick to your process. And our process is having a bit of valuation framework to help us make our decisions around when we enter and exit companies or stock positions.

The post Avoid my biggest mistake in investing: fund manager appeared first on The Motley Fool Australia.

Inflation and higher interest rates have hit both valuations and investor confidence about where earnings are headed for many businesses.

While some businesses are going to see a bit of an earnings dip, the level of share price pain may be too much when considering the long-term potential of these businesses.

In my view, here are two very cheap ASX shares.

Dusk Group Ltd (ASX: DSK)

Dusk is an ASX retail share with a market capitalisation of more than $120 million according to the ASX. The company describes itself as an Australian specialty retailer of home fragrance products.

It sells Dusk-branded products from its physical stores and through its website. The products are designed in-house and exclusive to the company. Some of the products the business sells include candles, ultrasonic diffusers, reed diffusers, and essential oils, as well as fragrance-related homewares.

Since July 2021, the Dusk share price has dropped around 50%. In the first 19 weeks of FY23, the business saw total sales growth of 23.9%, though this was put down to store closures in the first half of FY22 due to COVID-19. The gross profit margin was "in line" with the prior year.

It opened five new stores in Australia in time for Christmas, with another three or four expected to open in the second half.

Using the estimates on Commsec, the Dusk share price is valued at nine times FY23's estimated earnings with a possible grossed-up dividend yield of 12.3%. That makes it seem like a cheap ASX share to me. The current projections suggest the business could grow its earnings and dividend in FY24.

City Chic Collective Ltd (ASX: CCX)

City Chic is a former market darling that has fallen very hard. It's down close to 90% since September 2021.

The business is a retailer of clothing, footwear, and accessories to plus-size women.

It has a growing global presence. The company has the City Chic brand in Australia, Evans in the UK, and Avenue in the US.

The business is currently having a rough time. In the 26 weeks to 1 January 2023, the company saw global sales revenue of $168.6 million. This would represent a decline of 8% year over year, up 38% over FY21.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be a loss of $2.5 million to $4 million.

The company has had to discount products, hurting the gross profit margin, to "stimulate demand". It's also resulting in a higher cost of doing business (CODB) as a percentage of sales for the first half of FY23 compared to the prior corresponding period.

The one positive was that inventory is expected to be between $163 million to $164 million at the end of the half, ahead of target. By the end of FY23, it's aiming for between $125 million to $135 million.

Profitability is expected to return in FY24 according to Commsec, with the City Chic share price valued at 20 times FY24's estimated earnings and 14 times FY25's estimated earnings. I think this makes the business a cheap ASX share after its heavy fall.

While the last several months have been tricky, I think the business will be able to turn it around and achieve good growth in the northern hemisphere as long as it keeps investing in the business.

The post I think these 2 cheap ASX shares are buys for value investors appeared first on The Motley Fool Australia.

The S&P/ASX All Ordinaries Index (ASX: XAO) closed in the green today, up 0.23%.

Among the index's biggest movers and shakers on Friday were the following three companies that all released earnings results today.

Let's take a look at the detail.

Yancoal Ltd (ASX: YAL)

The ASX coal share was up 4.57% at $6.64 at today's close of trade. The ASX All Ordinaries share opened at $6.33 following the company's release of its quarterly activities report after the market close yesterday. This was an 0.3% fall on yesterday's closing price.

The company reported an average realised price of A$422 per tonne of coal during the December quarter. The full-year average was A$378 per tonne, up 168% from 2021. The company increased its cash holdings by $1.5 billion and had a balance of $2.7 billion as of 31 December.

Yancoal CEO David Moult said:

Yancoal enters 2023 primed to begin an operational recovery program following two years of unprecedented disruptions. The timeline to full recovery depends, in part, on external factors such as wet weather and workforce availability. The intention is to restore productivity and efficiency, leading to improved production rates in successive periods.

Supply side constraints and global energy market uncertainty lifted international thermal coal prices to record levels in 2022. The supply side recovery is likely to occur gradually, and structural imbalances should persist in the international market.

We anticipate international thermal coal prices to remain well supported in 2023.

The Yancoal share price is up 127% over the past 12 months.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price closed Friday trading 7.69% lower at 66 cents. The ASX All Ordinaries share opened at 67 cents following the pre-open release of a trading update for 1H FY23. This was a 6.3% fall on yesterday's closing price.

City Chic reported preliminary and unaudited global sales revenue figures of $168.6 million for the six months. This is 8% down on the prior corresponding period (pcp) but up 38% on FY21.

There was an underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) loss of between $2.5 million and $4 million over the half. The fashion retailer has an inventory worth about $163 million, which is ahead of target. It has net debt of $12.9 million with an amended debt facility.

The company said it was experiencing a higher cost of doing business. Consumer demand "continued to be volatile" during the half, with promotions required to stimulate sales, thereby reducing margins.

City Chic CEO Phil Ryan said:

… we continue to focus on cost management and with the support of our lender have amended our debt facility in line with our changing business needs. We remain extremely confident in executing on our strategies and returning to profitable growth as these cyclical headwinds unwind.

The City Chic share price is down 87% over the past 12 months.

Australian Ethical Investment Ltd (ASX: AEF)

The Australian Ethical Investment share price was down 2.6%, trading at $4.50 at today's market close.

The ASX All Ordinaries share opened at $4.59 after the company released its quarterly funds under management (FUM) report before the bell. This was 0.65% lower than yesterday's closing price.

Australian Ethical Investment reported positive net inflows of $160 million for the quarter. This was mainly from superannuation funds, with fewer investors currently putting money into managed funds.

As of 31 December 2022, Australian Ethical Investment had $8.37 billion in FUM, up 35% from 30 June 2022. The Christian Super successor fund transfer (SFT) added $1.93 billion to the fund during the quarter.

Investment performance for the quarter was $110 million.

The Australian Ethical Investment share price is down 58% over the past 12 months.

The post ASX All Ordinaries shares on the move following earnings updates appeared first on The Motley Fool Australia.

Embattled S&P/ASX 300 Index (ASX: XKO) share City Chic Collective Ltd (ASX: CCX) has a new major investor following a $7.75 million buying spree by billionaire retail fanatic Brett Blundy.

The entrepreneur began his career by building a struggling Melbourne music store into Sanity Entertainment Group and has since founded Bras N Things. He now commands a $2.28 billion fortune, according to The Australian.

Blundy is no stranger to the ASX retail space, either. He currently boasts notable stakes in Lovisa Holdings Ltd (ASX: LOV), Accent Group Ltd (ASX: AX1), and now, City Chic.

Let's take a closer look at the ASX 300 share's newest major shareholder.

Aussie retail billionaire snaps up City Chic shares

No doubt plenty of eyes are on the City Chic share price on Thursday. Blundy's new 7.3% stake in the struggling plus-sized fashion retailer was revealed yesterday.

The billionaire built the holding up in four purchases between 22 December and 16 January, paying an average of around 44 cents per share.

The first purchase occurred just days after the City Chic share price crashed 31% to a 52-week low of 37.5 cents on the release of a disappointing trading update.

The company declared it expects to post an earnings before interest, tax, depreciation, and amortisation (EBITDA) loss for the first half after demand faltered, forcing it to spend on more promotional activity.

The ASX 300 share has since rebounded to trade at 72 cents at the time of writing, 12.5% higher than its previous close.

Though, it's still a whopping 87% lower than it was this time last year.

What else is going on with the ASX 300 share?

Blundy's buy wasn't the only change in the company's register announced yesterday.

It also revealed the nation's largest super fund, AustralianSuper, has reduced its position in the retailer by 6.16 million shares leaving it with a 5.9% stake, down from 8.5%.

Eagle-eyed market watchers might also be eyeing the City Chic share price for another reason.

The company previously promised to release a detailed trading update for the first half in mid-January. No such announcement has been released at the time of writing.

The post Guess which beaten-up ASX 300 share this Aussie billionaire is buying up big appeared first on The Motley Fool Australia.

Two ASX 300 retail shares are a buy but another may fall slightly, according to analysts at Macquarie.

The broker rates Lovisa Holdings Ltd (ASX: LOV) and Premier Investments Ltd (ASX: PMV) as buys, while City Chic Collective Ltd (ASX: CCX) is rated neutral.

Let's take a look at the outlook for these three ASX retail shares.

Will retail shares bounce back?

Macquarie analysts have placed an outperform rating on the Lovisa share price with a $27 price target. It also rates Premier Investments as outperform with a $29 price target. Premier Investments has a portfolio of retail brands including Portmans, Just Jeans, and Peter Alexander.

The Macquarie team likes retailers with scale, strong balance sheets, and market-leading brands, with youth consumers well positioned in today's economic environment, the Australian Financial Review reported.

Lovisa shares fell 0.29% on Tuesday to close at $24.21 each. Macquarie's price target of $27 implies an upside of 11.5%. In November, Lovisa reported global store sales in the first 19 weeks of FY23 to date were up 16.1% on FY22. The company also reported it had opened 47 new stores.

Premier Investments shares dropped 5.19% on Tuesday to close at $24.85. Macquarie's price target of $29 implies a 16.7% upside based on the current share price.

In early December, the company reported global sales in the first 17 weeks of 1H23 had soared 24.9% compared to pre-Covid 1H20 sales. The company also reported record sales during the Black Friday trading week.

However, looking at the bigger picture for retail, analysts at Macquarie are concerned about online sales traffic in the current economic environment, commenting (courtesy of AFR):

December website traffic data remains weak as retailers continue to cycle tough COVID comps. Online activity continues to moderate from elevated levels seen over CY20-21.

With this in mind, Macquarie has placed a neutral rating on City Chic Collective with a 42-cent price target, noting the company's website traffic fell 8.9% in the "first weeks of December", the publication reported.

City Chic shares fell 3.37% in Tuesday's trade to close at 43 cents apiece. On 20 December, City Chic reported global year-to-date revenue was down about 7% compared to the prior corresponding period. However, it was up 38% on FY21.

Meanwhile, the latest ANZ-Roy Morgan Consumer Confidence data, released today, shows consumer confidence lifted 4.9 points last week to 87.4. ANZ senior economist Adelaide Timbrell said:

This was the first new year's jump in confidence since 2018.

Share price snapshot

The Lovisa share price has soared nearly 32% in the last year.

Premier Investments shares have declined 11% in the past 52 weeks.

Citi Chic Collective shares have plunged 91% in the past year.

The post 2 ASX 300 retail shares to buy right now, and one to avoid: Macquarie appeared first on The Motley Fool Australia.

1) It has been a brutal year for those of us invested in growth and/or small cap stocks, with sharply rising interest rates having the effect of sending share prices of many such companies down 50% or more.

And the fight against inflation is not over yet, with central banks around the world still tightening, hoping to pull off a miracle soft landing, but more likely sending many economies into recession.

The narrative is shifting from questioning how high interest rates need to rise, and when central banks will pivot to lowering them, to predicting the severity and duration of the economic downturn. 

"Wall Street's 2023 profit decline could rival GFC," says the headline in the AFR, with Michael Wilson, Morgan Stanley's chief US equity strategist, saying the earnings recession could be similar to what transpired in 2008-09.

Based on its bearish earnings forecast, the investment bank is suggesting US equities could plunge more than 20% from current levels. Thankfully, "Morgan Stanley does not see signs of distress in the housing market or systemic financial risk, meaning it does not expect 50 per cent downside for shares, as seen in 2008," according to the AFR article.

"The fixation on inflation and the Fed continues, but markets appear to have moved past it and onto the real concern – earnings growth/recession," Mr Wilson said. "Rates and inflation may have peaked, but we see that as a warning sign for profitability."

2) Right on cue, enter plus size retailer, City Chic Collective Ltd (ASX: CCX) which today warned of continued volatile trading, with overall demand below expectations.

In response, City Chic has increased its promotional activity to drive demand, resulting in further gross margin compression. The company now expects to report a small underlying EBITDA loss in the first half, a half that encompasses the peak Black Friday and Christmas trading periods. Or should that be Red Friday, given Black Friday is thought to derive its name from the day when retailers go from losses to profits in the trading year?

The City Chic share price has taken yet another bath today, down 22% to 46 cents, and is now down 91% in the past 12 months.

Buying a falling knife – like City Chic – is fraught with danger. Profit warnings often come in threes, and turnarounds either don't turnaround, or can take longer than expected to recover.

It appears the Spheria Asset Management Australian Microcap Fund has been on the wrong side of the City Chic trade – so far at least – given comments in its November monthly update…

"We believe the share price fall has created an opportunity to buy a business at a significant discount to our view of its intrinsic value. The core driver of their earnings continues to be their Australian City Chic store business. Given the share price weakness you are buying the Australian business for ~5x normalised EBIT with potentially more upside for profit turnarounds at its international online businesses – Avenue (US based) and Evans (UK based)."

Stock picking – especially in this economic environment – is tough, especially in the retail sector. Consumers' willingness to spend on discretionary items is clearly going to deteriorate in 2023 as higher interest rates eventually take their toll. 

Beware the falling knife.

3) Coal, lithium and energy stocks have helped the S&P/ASX 200 Index (ASX: XJO) avoid the big falls seen on US markets, the Whitehaven Coal Ltd (ASX: WHC) share price taking the gold medal for the biggest gain in 2022, up over 300%, showing coal demand to be anything but in terminal decline.

Also helping prop up the ASX 200 index have been three out of the four big bank shares, with Westpac Banking Corp (ASX: WBC) shares up 8.9%, National Australia Bank (ASX: NAB) shares up 4.9% and Commonwealth Bank of Australia (ASX: CBA) shares up 4.6%. The odd bank out is Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares down 13.8% so far in 2022.

Beloved for their full franked dividends, bank shares also prop up many self managed super funds, helping deliver a solid year for many retirees. 

As thoughts turn to 2023, a year of falling house prices and subdued consumer confidence – and with them, lower lending demand and higher default rates – the premium valuation afforded CBA shares leaves little downside protection. 

Even the famed CBA fully franked dividend is not looking overly attractive, yielding just 3.6%, about the same as you can earn risk-free in a bank savings account. 

CBA shares are not the only popular blue chip stock trading on a premium valuation. According to S&P Capital IQ, Telstra Group Ltd (ASX: TLS) shares trade on 28 times earnings and Woolworths Group Ltd (ASX: WOW) shares trade on 27 times earnings. 

Put another way, that's an earnings yield for both stocks of about 3.5%, a rating that might make sense when interest rates are at close to zero, but leaves little downside protection with the RBA cash rate likely headed to 3.6% before Easter. 

Retirees looking to preserve capital whilst banking fully franked dividends from popular blue chip stocks might be looking at a much tougher 2023.

The post Little downside protection for popular ASX 200 shares as 2023 looms a much tougher year for blue chip stocks appeared first on The Motley Fool Australia.

Four ASX shares that are falling more than most today are listed below. Here's why they are dropping:

BWX Ltd (ASX: BWX)

The BWX share price is down a massive 48% to 33 cents. Investors have been hitting the sell button in response to a shocking business update. That update reveals that the Sukin skincare manufacturer missed its guidance in FY 2022, admitted to channel stuffing activities, downgraded its FY 2023 guidance, and revealed a growing mountain of debt.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is down 22% to 46 cents. The catalyst for this was another terrible update from the plus sized fashion retailer. City Chic revealed that trading conditions remain tough and it now expects to post a first half loss. This tough sales environment doesn't bode well for the company given its huge inventory position. Management expects to finish the half with inventory of $168 million to $174 million. This is 50% more than its current market capitalisation.

Domain Holdings Australia Ltd (ASX: DHG)

The Domain share price is down over 7% to $2.64. This has been driven by the release of a trading update from the property listings company this morning. That update reveals that December month to date listings are down around 51% in Sydney and 37% in Melbourne. As a result of the challenging market environment, first half EBITDA is expected to be around $48 million.

Johns Lyng Group Ltd (ASX: JLG)

The Johns Lyng share price is down 11% to $6.05. This morning, the company revealed that its executive director and COO, Lindsay Barber, has sold 4 million shares. The share sale represents almost a third of Mr Barber's prior holding.

The post Why BWX, City Chic, Domain, and John Lyng shares are sinking today appeared first on The Motley Fool Australia.

The City Chic Collective Ltd (ASX: CCX) share price is plummeting on Tuesday after the All Ordinaries Index (ASX: XAO) company released a trading update for the fiscal year so far.

The clothing retailer revealed it's on track to post a small underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) loss for the first half of financial year 2023.

Perhaps unsurprisingly, the market is reacting poorly to the news. After opening 15% lower at 50 cents, the City Chic share price plunged to a new 52-week low of 44 cents – 25% below its previous close.

Fortunately, things have since picked up slightly. At the time of writing, the City Chic share price is back up at 48 cents – 18.64% lower than its previous close.

Let's take a closer look at the update that's seemingly disappointed investors today.

All Ordinaries retail share plummets on trading update

The City Chic share price is being pummelled as Australia looks to the holiday season – a key period for the company's earnings.

The All Ordinaries company revealed that, since its last trading update in November, conditions have remained volatile amid lower-than-expected demand.

As a result, it has upped its promotional activity to drive demand, and that's compressed its gross margins.

Meanwhile, its revenue for financial year 2023 so far is 7% lower than it was at the same point of last year – sitting at $157.1 million. However, it's up around 38% on that of financial year 2021.

Combined, the two factors are expected to lead City Chic to post a first-half EBITDA loss. Though, that's subject to the coming fortnight's trade, encompassing the remainder of the holiday season.

More positively, the company's confident its inventory will be at the lower end of previous guidance – $168 million to $174 million.

The company will provide a more detailed trading update in mid-January following the end of the reporting period.

City Chic share price snapshot

This year has taken a major toll on the clothing retailer's stock. The City Chic share price has tumbled 91% year to date. It's also down 90% over the last 12 months.

For comparison, the All Ordinaries Index has dropped 8% year to date and 5% since this time last year.

The post Why did this ASX All Ordinaries share just crash 19%? appeared first on The Motley Fool Australia.

Four ASX shares that have failed to follow the market higher today are listed below. Here's why they are dropping:

Bubs Australia Ltd (ASX: BUB)

The Bubs share price is down a further 3.5% to 29 cents. Investors have been selling this infant formula company's shares after a disappointing update at yesterday's annual general meeting. Bubs' under-fire CEO, Kristy Carr, revealed that revenue is expected be flat during the first half. That's despite its revenue growing 29% during the first quarter and management hyping up its US expansion.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is down a further 15% to 63 cents. This latest decline means the struggling plus sized fashion retailer's shares are now down 54% over the last three trading sessions. Investors have been hitting the sell button following a very disappointing trading update. City Chic's sales are down and its margins are being crunched. It also expects to finish the first half with inventory of $168 million to $174 million. That's more than its currently market cap!

Collins Foods Ltd (ASX: CKF)

The Collins Foods share price has sunk over 18% to $8.19. Investors have been selling this quick service restaurant operator's shares following the release of its half year results. While Collins Foods delivered strong sales growth, its margins are being hit by cost inflation. In addition, the company revealed that it was pausing the Taco Bell expansion amid its deteriorating performance. It also took an $11.9 million non-cash impairment of eight Taco Bell restaurants.

Queensland Pacific Metals Ltd (ASX: QPM)

The Queensland Pacific Metals share price is under pressure again and down a further 6% to 11.7 cents. Investors have been selling this energy chemicals company's shares this week after it released the results of the advanced feasibility study on stage 1 of the Townsville Energy Chemicals Hub (TECH) project. The company expects stage one's capital expenditure to be $1.9 billion. This is almost 10x Queensland Pacific Metals' market capitalisation.

The post Why Bubs, City Chic, Collins Foods, and Queensland Pacific Metals are sinking today appeared first on The Motley Fool Australia.

Four ASX shares that are falling more than most today are listed below. Here's why they are sinking:

Bank of Queensland Ltd (ASX: BOQ)

The Bank of Queensland share price is down almost 6% to $7.13. Investors have been selling this regional bank's shares after it announced the surprise exit of its CEO, George Frazis. He has left with immediate effect and without comment. The bank revealed that the "Board has formed a view that different leadership is now required to ensure BOQ can continue to build a stronger and more resilient bank through future cycles."

Bubs Australia Ltd (ASX: BUB)

The Bubs share price has crashed almost 12% to a 52-week low of 30.5 cents. Investors have been hitting the sell button after the infant formula company's under-fire CEO, Kristy Carr, revealed that revenue is expected be flat during the first half. That's despite its hyped-up US expansion and the fact that first quarter revenue grew 29%. At its annual general meeting, almost 27% of shareholder votes were against Carr being issued 1 million share rights.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is down a further 27% to 72 cents. Investors have been selling this struggling plus sized fashion retailer's shares since the release of a terrible trading update on Friday. City Chic reported a decline in sales despite benefiting from a weaker Australian dollar. It also revealed significant margin pressures and expectations that it would end the first half with an inventory position of $168 million to $174 million.

Liontown Resources Ltd (ASX: LTR)

The Liontown share price is down almost 7% to $1.87. The weakness in the battery materials industry has continued on Monday with Liontown and a number of other lithium shares falling heavily. There are concerns over lithium demand due to rising COVID cases in China. In addition, bearish notes out of Credit Suisse and Goldman Sachs have weighed on sentiment in the industry.

The post Why Bank of Queensland, Bubs, City Chic, and Liontown shares are sinking appeared first on The Motley Fool Australia.

At the time of writing, the plus sized fashion retailer's shares are down over 23% to a multi-year low of 76 cents.

This means the City Chic share price has now lost 45% of its value in just two trading sessions.

Why are investors selling down the City Chic share price?

Investors have been heading to the exits in their droves following the release of a dismal trading update at its annual general meeting last week.

Financial year to date, City Chic reported a 2% decline in revenue to $128.6 million. This was driven largely by a very poor performance in the United States despite the benefits of favourable currency movements.

As a comparison, Goldman Sachs was expecting 18% revenue growth for the first half.

Management revealed that this poor performance was driven by "the consumer is looking for promotion as a reason to buy." This has led to the competitive landscape intensifying as retailers promote aggressively to capture the limited spending. This is also putting significant pressure on margins.

Another area that could be causing alarm for investors is the company's inventory position. Management's decision to load up on inventory in order to combat supply chain issues appears to have backfired spectacularly.

City Chic expects its inventory to be in the range of $168 million to $174 million at the end of the first half. That's almost as much as its market capitalisation. Following today's decline, City Chic now has a market capitalisation of approximately $185 million.

Broker response

According to a note out of Goldman Sachs, in response to the update, its analysts have retained their neutral rating but slashed their price target by almost a third to $1.10.

Goldman commented:

Both a weaker top line and gross margin pressure were key risks we had flagged in our initiation, particularly around US/UK/EMEA; however, the quantum of the downgrade was more severe than we had factored in our numbers. As a result, we revise our FY23/FY24/FY25 EPS down by -101%/-26%/-17% reflecting both revenue and gross margin downgrades and lower our 12m TP by 29% to A$1.10. With this offering 10% potential upside, we remain Neutral rated.

Despite the attractive long term growth opportunity, we believe there is near term risk around (1) elevated inventory levels; (2) the macro environment for the middle-income consumer in the US and Europe which has proven to be weak; and (3) discount intensity with the competitive landscape highly promotional.

The post Why has this ASX All Ordinaries share crashed 45% in 2 days? appeared first on The Motley Fool Australia.

Four ASX shares that have failed to follow the market higher today are listed below. Here's why they are dropping:

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is down a whopping 28% to $1.00. Investors have been hitting the sell button in a panic today after an abject trading update from the plus sized fashion retailer. City Chic reported a decline in sales despite benefiting from a weaker Australian dollar. It also revealed significant margin pressures and expectations that it would end the first half with an inventory position of $168 million to $174 million. City Chic's market capitalisation is currently $230 million.

Deep Yellow Limited (ASX: DYL)

The Deep Yellow share price is down 3.5% to 68.5 cents. This follows the release of an update on the Tumas project in Namibia. The uranium developer has completed its DFS, with the preliminary results indicating that the project remains "commercially attractive despite capital and cost inflation." While positive, investors may have been hoping for more bullish rhetoric.

Objective Corporation Limited (ASX: OCL)

The Objective Corp share price is down 14% to $12.93. This follows the release of a trading update from the technology solutions company after the market close on Thursday. Objective Corp revealed that its shift to a SaaS business is impacting revenue growth and higher costs are squeezing its margins.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is down 7% to $4.45. Investors have been selling Pilbara Minerals and other battery materials shares today amid concerns over the outlook for lithium prices. This follows bearish notes from Credit Suisse and Goldman Sachs, as well as soaring COVID cases in the key China market.

The post Why City Chic, Deep Yellow, Objective Corp, and Pilbara Minerals shares are falling appeared first on The Motley Fool Australia.

In morning trade, the plus sized fashion retailer's shares are down 24% to a 52-week low of $1.05.

Why is the City Chic share price crashing?

Investors have been hitting the sell button in a hurry this morning after the retailer released a trading update at its annual general meeting.

According to the release, City Chic's revenue is down 2% financial year to date to $128.6 million. While ANZ sales are up 10%, this has been offset by a worrying decline in Americas sales. The latter segment posted a 12% decline in revenue despite the significant weakness in the Australian dollar over the last 12 months.

Management commented:

Demand has been volatile, and the consumer is looking for promotion as a reason to buy. The competitive landscape, especially in the Northern Hemisphere, has intensified as all businesses promote aggressively to capture the limited dollars she is prepared to spend.

At a regional level there have been very contrasting results. The Southern Hemisphere, with stores open has shown growth and the Northern Hemisphere, which is facing much greater economic pressures, delivered a decline in revenue.

What else?

Another area of concern that could be weighing on the City Chic share price is the company's inventory position.

Management expects its inventory to be in the range of $168 million to $174 million at the end of the first half. As a comparison, City Chic currently has a market capitalisation of just over $250 million. This appears to indicate that investors have major doubts that the company will be able to successfully shift these items.

Another negative from today's update was management's commentary on margins. While no details were provided on its profits, its margin commentary appears to indicate that City Chic's earnings could be down sharply during the first half. It said:

The real issue for us to deal with in FY2023 is temporary margin compression driven by competition for reduced demand, together with transitory logistics costs in the Northern Hemisphere.

Given this bleak outlook, you may not be surprised to learn that the City Chic share price is now down over 80% since the start of the year.

The post What is driving the City Chic share price 21% lower on Friday? appeared first on The Motley Fool Australia.

The ASX share market has seen a lot of pain this year. As of this morning, the S&P/ASX 200 Index (ASX: XJO) has dropped 15% in the year to date.

Looking at some individual shares, the Xero Limited (ASX: XRO) share price has dropped 51%, the Wesfarmers Ltd (ASX: WES) share price has fallen 29% and the Goodman Group (ASX: GMG) share price has declined 41%. Those are some big declines for some of the ASX's biggest businesses. This doesn't happen often.

Today could be a solid day for the ASX share market after a strong performance by the US share market overnight. But, that will only erase a small portion of the decline we've seen this year.

Is this a good time to invest?

I think heavy market declines like we've seen this year are generally a great time to invest. That doesn't mean I think every single share is going to do well from here. But, prices are now a lot lower and I believe that a big part of successful investing is buying at a good price.

Choosing the right investment is obviously another key factor.

For much of the COVID-19 pandemic, the share market was going through a very strong bull run. It was finally halted as inflation and interest rates shot higher.

I'd rather buy ASX shares when investors are cautious and things look uncertain. When things look rosy, share prices tend to go pretty high, as we saw in 2021. I'd prefer not to buy at a high price.

There's a great Warren Buffett analogy about burgers when it comes to investing. In 2001, Buffett said:

To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.

Where are the opportunities?

For starters, the three ASX shares that I named at the beginning of this article look like attractive options to me.

There are a number of high-quality ASX shares that have been sold off that still have strong positions in their industry, such as REA Group Limited (ASX: REA), Sonic Healthcare Limited (ASX: SHL), Metcash Limited (ASX: MTS) and Temple & Webster Group Ltd (ASX: TPW).

I also believe there are several retailers that have been sold off which look interesting with a long-term view, including Premier Investments Limited (ASX: PMV), Nick Scali Limited (ASX: NCK), Adairs Ltd (ASX: ADH), Universal Store Holdings Ltd (ASX: UNI), City Chic Collective Ltd (ASX: CCX) and Baby Bunting Group Ltd (ASX: BBN).

JPMorgan's Mary Callahan Erdoes thinks opportunities (to outperform) are everywhere, according to reporting by CNBC. She said:

There is alpha everywhere. It's in stocks. It's in bonds. It's in currencies. It's in real estate. It's in private markets. It's in public markets. It's everywhere, because we are in such a state of change.

There were two areas that she picked out as opportunities: the UK banks and China. Erdoes said:

Don't fight investing in China. It's a country that is going to emerge from Covid. It's a country that is going to put its 22% youth employment back to work. It's an economy that is going to continue to invest in EVs, semis, et cetera.

Last week people said don't invest in a single thing in the UK. That is exactly when people like us, and people in the room, think, 'Let's go look right there'.

She also said that UK banks might be "the most interesting thing" that an investor could look at.

What are the options?

How can we access those ideas when they aren't listed on the ASX? Well, there is a UK bank that's listed as an ASX share — Virgin Money UK (ASX: VUK) — it's down 37% in 2022.

To access the UK share market, investors could use an exchange-traded fund (ETF) like the Betashares Ftse 100 ETF (ASX: F100), given it features 100 of the biggest businesses listed in London.

In terms of Chinese shares, Betashares Asia Technology Tigers ETF (ASX: ASIA) is an option — it owns 50 of the biggest tech companies in Asia outside of Japan. Around 55% of the portfolio is allocated to mainland China shares.

The post Should you really be buying ASX shares in this market? appeared first on The Motley Fool Australia.

'Buy low, sell high' is a timeless investment axiom, but it's easier said than done.

After all, if you want to buy ASX shares for cheap, you need to be at least a bit contrarian.

And this means backing a company when it's friendless among other investors. Buying in at such a time takes genuine courage.

Through all the turbulence seen in share markets in 2022, one of the sectors that investors have abandoned is retail, especially those that sell discretionary products.

The logic is that as interest rates rise, Australians will have less to spend. When people have less cash to burn, the first items they will cut out will be those that are not necessary for survival.

Take City Chic Collective Ltd (ASX: CCX) and Dusk Group Ltd (ASX: DSK) for example. Those ASX shares have dropped a painful 74% and 46% respectively so far this year.

'Bearish sentiment is at a low ebb'

Earlier this month, Montgomery Investment Management founder Roger Montgomery revealed his fund had reduced its exposure to retail.

"The reasons we are underweight discretionary retail is because they are underperformers in an inflationary environment," he said on the Montgomery blog.

"Declining house prices represent inescapable quicksand on spending, and if they are growth stocks, their price-to-earnings ratios are vulnerable to further compression."

But only a couple of weeks later, he thinks there are signs retail stocks may have bottomed.

"The comments we subsequently received pointed out that bearish sentiment is at a low ebb, and reflected in single digit price-to-earnings ratios for even high quality retailers," Montgomery said this week.

"Those observations are indeed reasonable, and so it now falls on the investor to determine whether positive changes are evident in the world of consumer spending and retail sales."

Another encouraging sign, according to Montgomery, is that inflation expectations are starting to ease.

"Expectations for the inflation rate for the next 12 months have declined to 4.6% from 4.8% in September," he said.

"That is the lowest reading in 12 months and the third consecutive decline. The [US] Federal Reserve action on rates is having the desired effect, preventing high current rates of inflation from dangerously feeding into higher expectations for the future."

Montgomery noted that the inflation expectations for the next five years have dropped to 2.8%, which is the lowest in 14 months.

Consumer health is much better in Australia than elsewhere

In Australia, 'consumer health', as measured by Goldman Sachs, is faring much better than in other advanced economies.

"Their consumer health average registers around percentile 35 in the Euro Area and the UK, down from around 50 three months ago… The average stands at around percentile 40 in the US and percentile 50 in Canada, down from 70 three months ago," said Montgomery.

"On the positive side, their consumer health average sits around percentile 60 in Japan and Australia, down only slightly from around 65 three months ago."

All this, for Mongtomery, means that Australian retail stocks may be oversold.

"It does look like Australian retail stocks have fallen in sympathy with their overseas counterparts," he said.

"However, those declines might be undeserved, at least for retailers with no overseas exposure."

So those very ASX shares that his fund has shunned in recent times could be prime targets now for those seeking to buy at the bottom.

"Single digit price-to-earnings ratios for even high quality Australian retailers could represent a bargain, if the benefits of global store rollouts offset the weaker stats coming out of those foreign domiciles."

The post Has this ASX sector hit rock bottom? Is it time to buy in? appeared first on The Motley Fool Australia.

There is much volatility on the ASX share market right now, as with markets around the world. I think this could prove to be a fine time to go hunting for cheap ASX share opportunities.

Indeed, one of the world's best-performing and wisest investors Warren Buffett has offered his wisdom on times like these:

Be fearful when others are greedy, and greedy when others are fearful.

Certainly, it could be useful to think with a contrarian mindset. When investors sell off an entire sector or even the entire share market, it could be a sign of longer-term opportunity. It could also be a time to be greedy with sectors that are cyclical.

Retail businesses aren't always going to have booming sales and profits. When a downturn is seemingly approaching, and share prices drop, it could be fruitful to find some cheap ASX shares that could see a turnaround in the medium term.

While share prices may see the bottom of their decline sooner rather than later, it could take a while for net profits to reach the bottom of their cycle. Share prices often move harder and earlier than companies' financials.

Adairs Ltd (ASX: ADH)

Adairs is a retailer of homewares and furniture with brands like Adairs, Mocka, and Focus on Furniture.

How much pain are we talking about for the Adairs share price? The ASX share is down by 57% in 2022 at the time of writing. That's a very large fall. It's similar to the plunge seen during the worst of the COVID-19 crash in March 2020. However, I don't think things look as dire now as they seemed then.

For one, shops are now open (with no lockdowns). People still need furniture, bedsheets, and so on. Adairs is still working on plans for growth including opening more stores, upsizing some stores, growing online sales, offering more products, and so on.

The broker Morgans thinks that the Adairs share price is valued at just six times FY23's estimated earnings with a potential grossed-up dividend yield of 14.7%.

City Chic Collective Ltd (ASX: CCX)

City Chic is a leading retailer that sells clothes, footwear, and accessories to plus-size women. The ASX share has a large presence in Australia, the UK, and the US, while also having a small presence in Europe.

It has been a harsh year for the City Chic share price, which has dropped by 73% in 2022. It last traded at $1.48 a share. While I'm not expecting the share price to get back above $6 any time soon, I think that this much-lower valuation now includes a lot of pessimism.

While FY22 did see elevated inventory as well as negative cash flow (due to a large increase in inventory), it also saw growth. Sales revenue grew by 39% to $369.2 million, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 11.3% to $$7.1 million and underlying net profit after tax (NPAT) increased by 14.5% to $28.5 million.

The ASX share is expecting profitable growth in FY23, with price increases to offset rising costs while also growing market share.

Macquarie's estimates for the retailer suggest that the City Chic share price is valued at 12 times FY23's estimated earnings and 11 times FY24's estimated earnings.

The broker also thinks that City Chic could start paying a dividend in FY23, with a potential grossed-up dividend yield of 8.7%.

The post I think these 2 cheap ASX shares are buys for value investors appeared first on The Motley Fool Australia.