Why Retail Stocks Stand to Keep Gaining

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Supply-chain snafus and inflationary pressures may linger longer than expected for retailers in 2022. But momentum is on their side, and the trends will help boost retailers’ stock prices in the new year.

For starters, consumers have returned to malls, spending some of that excess savings from the pandemic, even as a renewed threat from Covid looms. And they now have an array of new shopping experiences and payment options.

“We were on this crazy online trajectory,” says Katie Thomas, a researcher at management consultant Kearney Consumer Institute. “Now it’s really about figuring out what the whole store experience looks like and how to engage with consumers throughout the different channels.” Think partnerships, like

Ulta Beauty (ticker: ULTA) opening “shops within a shop” locations in

Target (TGT) stores.

The most successful retailers are those that have seamlessly melded their digital operations with physical stores, Thomas says.

Warby Parker (WRBY), the eyewear purveyor that started its business online, is on track to open 35 new physical stores in 2021, and it plans to open more in the new year. Warby went public in September, and the stock is up 11.53% from its IPO reference price of $40.

Walmart (WMT) raised its fiscal 2022 U.S. same-store sales growth outlook, maintaining its strategy of keeping prices low as shoppers confront inflation. The company navigated supply-chain issues before the holidays this year by chartering its own ships, rerouting them to less-crowded ports, and hiring more workers.

Home Depot (HD) and

Lowe’s (LOW) will continue to benefit from the surge in home buying and renovation. Oppenheimer said in a report that the outlook for both retailers remains strong even as consumers look to return to normal life in 2022. Home Depot has an average earnings-per-share estimate of $16.12 for calendar year 2022, up from $15.16 this year, according to FactSet. Lowe’s is expected to earn $12.82 per share next year, up from $11.71 for this year.

Meanwhile,

Nike (NKE) is betting that the future of retail is in the metaverse. It bought RTFKT, which creates one-of-a kind virtual sneaker designs for savvy gamers. Expect more retailers to jump in—the luxury digital-hybrid collectibles could be a $25 billion segment of a $300 billion non-fungible token market by 2030, Morgan Stanley estimates.

See What’s Ahead for These Sectors in 2022

Write to Logan Moore at [email protected]