Support from the CARES Act and an increased digital presence over the past year have helped many retail companies survive the COVID-19 pandemic. And, as pandemic restrictions ease, job growth and direct recovery checks are likely to increase consumer spending over the coming months and help retail stocks gain momentum. So, we think L Brands, (NYSE:LB), Crocs (NASDAQ:CROX), and Abercrombie & Fitch (ANF) are poised to make a strong comeback this summer.U.S. retail stores reported an 18.3% month-over-month rise in sales in May 2020 due to panic shopping but faced declining sales thereafter. Despite being overshadowed by soaring e-commerce sales over the past year, the retail industry demonstrated operational resiliency through rapid digitization and support from the $2 trillion-plus CARES Act in March 2020. This is evident in the SPDR S&P Retail ETF’s (XRT) 77.3% returns over the past six months versus SPDR S&P 500 Trust ETF’s (SPY) 20.6% gains over this period.
Multiple direct recovery checks paid out by the federal government have been to the benefit of retailers through the increased consumer spending they have generated. Also, a declining unemployment rate is expected to boost consumer spending further in the near term. And, as more people are vaccinated, brick-and-mortar retailers are expected to witness increasing foot traffic. The National Retail Federation expects the retail sales to exceed $4.33 trillion in 2021.
Therefore, we think it is wise to invest in budding retail stocks L Brands, Inc. (LB), Crocs, Inc. (CROX) and Abercrombie & Fitch Company (ANF) because they are well-positioned to deliver solid returns this summer with their established retail chains and digital presence.