December 22, 2020

In 2021, Online Shopping is Here to Stay

by Jharonne Martis.

Perhaps the biggest retail trend in 2020 was the accelerated shift Americans made to online shopping, driven by the COVID-19 pandemic.

This trend will be a big contributor to the economy in 2021 as e-commerce continues to grow as a percentage of total retail sales. Note that e-commerce transactions accounted for 14.3% of retail sales as of Q3 2020, compared to 4.2%

The survey also shows that the number-one holiday gift is gift cards for both Americans and Canadians. This means there will likely be a delay in purchases, and the reporting of sales/revenue until these gift cards are redeemed. Consumers might receive these cards as gifts, and then just carrying them in their wallets for many months, even if they are Visa cards for “emergency cash.” This means the market could potentially be deprived of immediate infusion.

Of all the gifts they have either already purchased or intend to do for others, the following are the categories they will be gifting during this 2020 Holiday season:

Exhibit 2: Items U.S. Consumers are Looking to Purchase this Holiday 2020


Source: Maru/Blue Public Opinion Survey

Which consumer stocks are setting up for big moves?

Home Improvement

As another wave of COVID-19 looms, consumers continue to improve the stay-at-home experience. Home Depot and Lowe’s posted impressive e-commerce sales in Q3 2020. The same can be said for the holiday sales same store sales, which are projected to continue to grow in 2021. This is mainly because there has been an uptick in DIY projects. Consumers are at home, fixing and improving their households.

Exhibit 3: Home Improvement Same Store Sales 2019 – 2021

Source: I/B/E/S data from Refinitiv

Home Furnishing

This is another sector benefiting from the nesting trend. Lovesac, Williams-Sonoma, Restoration Hardware and Haverty’s Furniture are all expected to post double digit comps for the holiday season and in the first quarter of 2021 (Exhibit 4). This is very impressive as these retailers are facing difficult comparisons from a year ago. A 3.0% SSS reflects healthy consumer spending, thus the numbers in this sector are all robust.

Exhibit 4: Home Furnishing Same Store Sales Estimates Q4 2020 – Q1 2021

Source: I/B/E/S data from Refinitiv

Health and Wellness

Consumers’ homes have been converted into gyms in 2020 as health and wellness continues to be a top priority. Dick’s Sporting Goods, Hibbett Sports and Vista Outdoor e-commerce sales have all risen in 2020, and their StarMine models are also telling us that this trend might continue into 2021 (Exhibit 5).

Exhibit 5: StarMine Model Scores for Sporting Goods

Source: I/B/E/S data from Refinitiv

The StarMine ARM model is highly predictive of both the direction of future revisions and price movement. All three sporting retailers score a 90 or higher out of a possible 100, suggesting that analysts are likely to revise earnings estimates upward.

What’s more, earnings are of good quality. According to the StarMine Earnings Quality model, these companies score a 96, or higher, out of a possible 100. The high scores suggest that profits could be from sustainable sources. The StarMine Value-Momentum (Val-Mo) model suggests that they also rank in the top decile of all stocks in the region.

Similarly, Nike and Lululemon have an impressive StarMine Price Momentum model scores (Exhibit 6). They are both in the top decile and score a 92 or higher, out of a possible 100. Those scores suggest that positive stock price momentum is in these companies’ favor.

Exhibit 6: StarMine Price Momentum Model Scores for Sporting Goods

Source: I/B/E/S data from Refinitiv

Discounters

Finally, the discounters gained a lot of market share in 2020, especially at the expense of the department stores. Target alone said market share gains for the first half of 2020 totaled $5 billion. The retailer is expected to continue to do well as analysts polled by Refinitiv are optimistic on its new collaboration with Sephora.

Exhibit 7: Discounter Same Store Sales Estimates Q3 2020 – Q4 2020

Source: I/B/E/S data from Refinitiv

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