Stocks jumped higher on Tuesday after the Commerce Department reported that U.S. retail sales jumped 17.7% in May, marking the biggest jump on record.
“As states began to reopen their economies, households reopened their wallets,” said Andrew Grantham, an economist at CIBC.
But while the jump was encouraging, Grantham said, “this is probably the easier part of the recovery in consumer spending, with pent-up demand as consumers sat at home supported by stimulus checks many households received in April. While those factors could support another strong gain in sales in June, thereafter the recovery will get slower and more uneven.”
Still, there’s one retail stock that Oppenheimer’s Ari Wald says is poised to continue to rise higher.
“For the traditional brick-and-mortar retail industry, we would recommend avoiding them, but there is a slice of retail we are bullish on and that’s internet retail,” Wald, Oppenheimer’s head of technical analysis, said.
In particular, Wald likes Etsy (NASDAQ: ETSY) shares. Etsy is up 96% so far this year.
“We can see that Etsy has broken higher, it’s forming a bullish pennant pattern above $71, we expect that breakout to resume to the upside,” Wald said.
Wald compared Etsy’s chart to Urban Outfitters (NASDAQ: URBN), which by comparison is stuck below its breakdown at $22 after falling more than -35% so far this year.
“That really just shows how wide ranging the trends are in this space, and why we think investors and traders both need to be selective,” Wald concluded.
Michael Bapis, managing director at Vios Advisors at Rockefeller Capital Management, said that the underperformance seen in Urban Outfitters is seen in other brick-and-mortar retail stocks like Kohl’s (NYSE: KSS) and Macy’s (NYSE: M), and the trend should continue.
“They’ve been under pressure for years due to Amazon (NASDAQ: AMZN) and other e-commerce retailers. The pandemic just accelerated it,” Bapis said. “We think you’ve got to be with companies who can reinvent themselves and have constant innovation in their product as well as their e-commerce platform and in-store platform.”
Like Urban Outfitters, both Kohl’s and Macy’s are down by double digits this year, down -54% and -57%, respectively.