NEW YORK, Dec 18 (Reuters) - As holiday shopping season
wraps up, U.S. equity investors are gauging whether
long-languishing shares of brick-and-mortar retailers can
sustain their recent rebound in anticipation of a full economic
reopening in 2021.
The SPDR S&P Retail ETF, which tracks a broad group
of retailers such as department and specialty stores, is up
nearly 40% this year. Its gain reflects a rally that has lifted
shares of companies in sectors particularly sensitive to the
economic cycle, such as industrials and energy, in the wake of
recent breakthroughs in COVID-19 vaccines.
Those numbers pale in comparison with the massive gains
online companies such as Amazon.com Inc, Etsy Inc
and Wayfair Inc have notched this year, after the
pandemic accelerated a shift toward internet shopping.
Some investors, however, believe that more traditional
retailers may be able to narrow that gap in the coming year.
Their view dovetails with a broader bet that vaccines against
the coronavirus will spur widespread economic reopenings across
the United States, helping the industries that have suffered
most from the effects of COVID-19.
"There's anticipation of people shopping," said Kim Forrest,
chief investment officer at Bokeh Capital Partners. "Wall Street
is looking forward to a time when we are not locked down."
Investors next week will have an eye on the University of
Michigan's widely followed consumer sentiment index, which
remains below pre-pandemic levels but has recently ticked
One source of consumer spending could come from additional
stimulus checks to individuals included in a $900 billion
coronavirus aid package that Congress has moved closer to
approving, said Alex Ely, chief investment officer of Macquarie
Investment Management's small and mid-cap growth equity team.
At the same time, brick-and-mortar stores that have
withstood the economic onslaught from the pandemic may have more
solid footing next year as competitors have faltered, said Eric
Marshall, portfolio manager at Hodges Capital Management.
J.C. Penney, J. Crew, Pier 1 Imports and Neiman Marcus are
among the retailers that declared bankruptcy this year.
"On the back side of this... there could come a period of
prosperity," Marshall said.
Retail shares likely will not advance in unison, as the
pandemic has only magnified long-standing trends that will
separate winners from losers, investors said.
Jason Hans, portfolio manager at BMO Global Asset
Management, expects department stores to resume their
underperformance. At the same time, certain specialty retailers
could catch up once in-store shopping recovers, he said. He has
added to his position in children's clothing company Carter's
Traditional retailers' online presence may also play an
important role in determining their fate.
Hodges Capital's Marshall, for instance, owns shares of
American Eagle Outfitters, which has substantially
increased its online sales.
Bokeh Capital's Forrest said she has gravitated to retailers
such as Urban Outfitters Inc, which she classifies as
"good real-world merchandisers" - those that successfully lure
customers into impulse buys and have potential to translate that
strength into online sales.
The retail recovery, however, may face some hitches. U.S.
retail sales fell more than expected in November, likely weighed
down by raging new COVID-19 infections and decreasing household
income. Further delays in additional fiscal stimulus could place
more near-term strain on economic indicators.
But some investors are willing to look past that momentary
"The fundamentals are going to be much better in the second
half of 2021 and 2022," Macquarie's Ely said. "But you want to
buy six to nine months ahead of when things are great. Now is
(Reporting by April Joyner; Editing by Ira Iosebashvili and Dan