Did you know about an ecommerce stock that surged over 1,000% during the pandemic year? Or how about some household names among physical retailers that jumped about 60%-75% in a year marred by lockdowns and store closures? Investors in Utah-based Overstock.com (OSTK), an online furniture retailer, and the likes of Target (TGT) and Kohl’s (KSS) must be a happy bunch with their returns, especially in a turbulent environment brought about by the pandemic.
In fact, shares of several retailers and ecommerce firms have given stellar returns — whether it’s the home improvement firm Home Depot (HD), or the world’s biggest retailer Walmart (WMT). Take a look at the performance chart of a few such companies right from March 11, 2020, when the World Health Organization characterised COVID-19 as a pandemic.
Retail Stocks Percentage Returns for the Past Year
The picture gets far better for e-commerce firms in this chart below.
Percentage Returns of E-commerce Firms for the Past Year
Revamping the Cart
Groceries, lifestyle brands, and internet shopping giants etc were in demand and they swiftly moved to improve logistics, invest in online mediums, and prune costs. Customers, meanwhile, stockpiled on essentials and increased their online shopping while being confined to their homes due to stay-at-home orders. In fact, American spending rebounded in January, with retail sales growing 5.3%.
Why are they trending?
- Ease in Restrictions: Many states have dropped mask mandates and eased restrictions. Texas and Mississippi did that last week, and Iowa, Montana and North Dakota followed suit as well. These are likely to bring in more footfalls to physical stores.
- Increased Vaccinations: U.S. has ramped up its inoculations’ rate and President Joe Biden has said there’ll be enough vaccines for all adults by the end of May, which will encourage further reopening of economies and boost purchases.
- Increased Spending Potential: With more Americans are looking to spend more, a trend reflected in January retail sales which grew 5.3%- the most since June last year.
- Rise in Online Sales: Last quarter of 2020 saw consumers spending online by 32.1% more from a year ago. Digital Commerce 360 estimates that more than $1 in every $5 was spent on retail purchases during the quarter.
- Bright Road Ahead for Retail Sales: As per estimates, total retail sales are projected to be $5.94 trillion in 2024, up from $5.47 trillion in 2019.
Conditions Apply?
- Safety and Logistics: Vaccinations and stimulus optimism aside, retailers also face risks of higher costs of logistics and safety measures, among others, along with the risk of shutdowns if new waves of the coronavirus hit the country.
- Slow-Down in Online Retail: Online-only companies face the risk of steadying or a slowing in their frenzied sales trends as shoppers will likely scout for physical stores or alternatives from the crowded online e-shopping space.
- High Staff Costs: Biden’s commitment to stay with minimum wage cap of $15 could also force many companies to hike salaries and lead to higher staff costs. This is in additional cost they have to bear for their employees choosing to get vaccinated.
The Takeaway
Retailers and ecommerce firms are likely to be on investors’ radar for a while. And, with a tailwind of pent-up demand being released after economies completely reopen, these stocks could garner more interest. Should you proceed to checkout?
