There are no two ways about it: COVID-19 has been tough on everyone. But, if there was one sector that simply could not afford a global pandemic, it was retail.
So why are investors suddenly bullish on retailers?
Is the pandemic over?
Nope, not yet I’m afraid. But it does look like shoppers had a good time browsing stores in August. According to the Census Bureau’s latest report, released yesterday, retail sales rose a surprising 0.7% last month versus expectations of a 0.8% decline.
Against the backdrop of yet another weekly jobless claims miss, further auto sales declines, and increasing Delta variant cases across the U.S., this sliver of hope has provided investors with much to be optimistic about.
What’s more, the experts are largely in agreement that Q4 holiday shopping will provide a much-needed boost to the retail sector. For example, the Mastercard SpendingPulse survey projects holiday season sales growth of 7.4% this year, with both brick-and-mortar and e-commerce growing at more or less the same rate.
As well as this, increased vaccination rates are expected to see shoppers return to stores as pent-up demand for the ‘browsing’ culture — something e-commerce cannot sate — will boost sales.
However, a word of caution; these are monthly recurring figures and, much like quarterly earnings reports, do not represent the interests of long-term buy-and-hold investors. Seeing retail stocks such as Nordstrom (NYSE: JWN) and Lululemon jump based on a monthly report represents short-term gains at best.
It is important that investors who are feeling bullish on retail right now do their homework. Was the company displaying signs of growth pre-pandemic? Does it offer a growing e-commerce solution? What’s its exposure in the event of further lockdowns?
Do this, and more, before buying off of short-term news.
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Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.