The retail industry has witnessed stellar growth over the past few months, due primarily to pent-up demand for discretionary products and rising consumer spending. With robust home delivery systems in place, retailers are expected to maintain their sales levels despite the resurgence of COVID-19 cases. Thus, we think small-cap retail stocks Guess' (NYSE:GES), Lands' End (LE), Zumiez (NASDAQ:ZUMZ), and Tilly's (NYSE:TLYS) should be valuable additions to one’s portfolio now.The retail industry has been one of the biggest beneficiaries of the rapid economic recovery and rising consumer spending. Retail sales increased 0.6% month-over-month in June, surpassing the consensus estimate of 0.4% decline. Over the past few months, increased foot traffic in brick-and-mortar stores amid a strong vaccination drive and pent-up demand for discretionary products has fueled retail sales. Higher shelf prices on account of multi-year high inflation rates have also boosted the sector’s revenues significantly.
While the re-imposition of mask mandates in outdoor spaces might limit retail in-store sales, robust home delivery networks operated by companies since last year should help them maintain their sales levels. Substantial pent-up demand and job growth should drive the retail industry to further growth in the coming months. Indeed, the National Retail Foundation (NRF) expects retail sales to grow between 10.5% - 13.5% to exceed $4.44 trillion in 2021.
Given this backdrop, we believe small-cap retail stocks Guess', Inc. (GES), Lands' End, Inc. (LE), Zumiez Inc . (ZUMZ), and Tilly's, Inc. (TLYS), with exceptional growth potential, should hit fresh highs soon.