Analyst house Canaccord Genuity has maintained buy recommendations across its covered specialty retail names, arguing investor sentiment has overcorrected, and that value is now on offer despite what is expected to be a tough end to the financial year.
In a note to clients, Canaccord said bricks-and-mortar retailers have been working through headwinds for some time, with sentiment toward the consumer discretionary sector at lows rarely seen in the past decade. But the broker believes much of the negativity is already reflected in current share prices.
"We see a lot of negativity 'in the price,'" the note reads, "and whilst immediate-term earnings remain uncertain, we consider value to be on offer across our covered specialty retail names."
Canaccord flagged that roughly two-thirds of the sector it tracks is trading at discounts of more than 25 per cent to five-year historical price-to-earnings multiples, with all covered names sitting between one and two standard deviations below their five-year valuation history.
Recent trading updates and end-of-financial-year sales data pointed to weak trends into the close of FY26, prompting the broker to revise assumptions across like-for-like sales, gross margins and cost of doing business. EBIT revisions in the five to ten per cent range were the average outcome.
Despite the downgrades, Canaccord retained buy ratings on Adairs, Dusk Group, Lovisa Holdings and Myer, citing clean or strong balance sheets, solid dividend yields and what it described as robust medium-term growth prospects for each.
The broker also noted that history suggests the retail sector responds strongly to shifting macro conditions, with rate movements and consumer sentiment acting as key re-rating catalysts.
Across Lovisa and Myer in particular, Canaccord has dropped its 12-month price target for both based on a revision of earnings and price-to-earnings, even though it believes both stocks are still worth buying into.