The retail industry has experienced phenomenal growth in recent months, owing to a falling unemployment rate, rising consumer spending, and increased demand for discretionary goods. Furthermore, because the FDA’s full approval of Pfizer-BioNTech’s COVID-19 vaccine could accelerate vaccination rates nationwide, the retail industry is expected to see rising in-store shopping. This, along with the near-zero interest rate environment, we think should drive the performance of small-cap retail stocks The Container Store (TCS) and The Cato Corporation (CATO) in the near term. Let’s discuss.The retail industry has benefited immensely from the accelerated pace of economic recovery and increased consumer spending over the past few months. According to the National Retail Federation, retail sales are expected to grow between 10.5% - 13.5% to more than $4.44 trillion in 2021. Furthermore, because the FDA has granted approval to the first COVID-19 vaccine, vaccination rates are expected to improve across the country, boosting in-store shopping activity.
In addition, the declining unemployment rate, continuous government support through fiscal stimulus, and retailers’ strengthening digital infrastructure and home delivery networks are projected to drive the industry's growth.
Moreover, we think small-cap players in the retail space should continue benefiting from the low-interest environment. Therefore, small-cap retail stocks The Container Store Group Inc. (NYSE:TCS) and The Cato Corporation (CATO) could deliver significant upside in the near term.