With the coronavirus keeping consumers at home this summer, a few retail stocks have been thriving.
Names like Amazon (NASDAQ: AMZN), Target (NYSE: TGT), Walmart (NYSE: WMT), and Home Depot (NYSE: HD) have been reporting record sales and their stocks have been climbing higher since the market bottom back in March.
And one retail analyst says these names—and a few others—still have plenty of room left to run.
“It’s going to be about home, active and electronics, and I think discounters had a terrific second quarter,” said Dana Telsey, Tesley Advisory Group CEO and chief research officer. “We’re still more in the early innings of it.”
According to Tesley, the stay-at-home trend will continue long after the pandemic is in the rearview.
“Home is going to continue to be a winner,” Telsey said. “It’s an office, an exercise center, an entertainment and now an education center also. I think consumers are basically re-investing in the remodels of their homes for a prolonged period of time.”
Pointing to Walmart, which posted its biggest earnings surprise in 31 years earlier this week, Telsey said that the big box retailer got a boost from coronavirus stimulus.
“Walmart is gaining share in terms of consumers – especially given their locations and proximity,” Telsey said. “I think they’ve got the benefit of stimulus. They’re winning at logistics and distribution along with product.”
Other names Telsey has her eye on are electronics retailer Best Buy (NYSE: BBY), as well as a few active clothing retailers.
“Let’s not forget we’re going to get Best Buy next week,” Telsey said, referring to the electronics chain’s second quarter report, which is expected next Tuesday. “Electronics will probably win, too, given what we’re seeing out there with computers, laptops, iPads – everyone is bolstering their connectivity at home and WiFi access.”
And with so many workers now working from home, Telsey sees the athleisure trend sticking around for the long haul with names like Lululemon (NASDAQ: LULU) continuing to outperform.
“Active clothing overall has proven to certainly be even a little bit more fashionable lately,” Telsey said. “Foot Locker (NYSE: FL) will still benefit. Dick’s (NYSE: DKS) will still benefit. I think LULU is going to continue to benefit also, and then the brands. I mean take a look at Nike (NYSE: NKE) because they will be a beneficiary.”
But while Telsey sees all these names continuing to rise higher, she did warn that how much higher may hinge on the passage of a new stimulus bill.
“We saw what a boost it was in the first half of 2020,” Telsey said. “We need it in the second half especially when we’re seeing that unemployment is still not making great strides. Given that consumer spending accounts for two-thirds of the economy, we need consumers to get out there and spend.”
However, Target CEO Brian Cornell said this week that the retail sector’s recent outperformance is thanks more to canceled summer vacations than to stimulus checks.
“In the pandemic, we’re not going to restaurants, we’re not going to movies,” Cornell said. “Those traditional summer trips have been canceled. We’re not on planes. We’re not spending dollars on lodging, so many of those dollars have been redirected into retail.”