Got $7,500? Here are 2 strong ASX retail stocks to buy now

It’s been a rough stretch for ASX retail stocks.

Lovisa Holdings Ltd (ASX: LOV) and Nick Scali Ltd (ASX: NCK) both slipped again on Thursday afternoon, falling 4% and 3% respectively at the time of writing.

That adds to a painful trend. Lovisa is now down 21% year to date, while Nick Scali has tumbled 31%.

So, is this a red flag or the kind of dip investors dream about?

Let’s break it down.

Lovisa: expansion in Europe, Asia and US

Lovisa has built a global fashion jewellery empire and it’s still growing.

The fast-fashion model of this ASX retail stock allows it to quickly adapt to trends, while its expanding international footprint continues to drive store growth. Lovisa has successfully scaled across Europe, the US, and Asia, giving it a long runway for expansion. That growth story is the key attraction.

But the market has cooled. Rising costs, softer consumer spending, and concerns about margins have weighed on sentiment. Retail is a tough game in uncertain economic conditions, and Lovisa isn’t immune.

And analysts are becoming more cautious on the ASX retail stock. Bell Potter recently retained its hold rating but slashed its price target to $24.00 from $33.50 — a significant downgrade. From current levels, that implies only around 5% upside over the next 12 months.

Still, for long-term investors, the global growth story remains intact if execution holds.

Nick Scali: strong margins, UK growth

Nick Scali has also been under pressure, but its fundamentals remain solid.

The furniture retailer is known for strong margins, disciplined cost control, and a premium product offering. It has also expanded through acquisitions, including its UK growth push, which could unlock new revenue streams. Like Lovisa, it benefits from brand strength and a loyal customer base.

But the risks are clear. Furniture is highly cyclical. When consumer confidence drops or interest rates rise, big-ticket spending is often one of the first areas to be cut.

That’s likely a big reason behind the recent share price weakness.

Even so, analysts see potential. Sentiment is cautiously optimistic, with five out of ten analysts rating the ASX retail stock as a buy or strong buy, and the other five sitting at hold. The average price target is $22.37, suggesting potential upside of around 39%.

That’s a meaningful gap from current levels.

Foolish Takeaway

Lovisa and Nick Scali have both been hit hard, but that’s exactly what makes them interesting.

For investors willing to look past short-term retail headwinds, these ASX stocks could offer a mix of recovery potential and long-term growth.

The key question: are you buying the dip or avoiding the risk?

The post Got $7,500? Here are 2 strong ASX retail stocks to buy now appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa and Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.