Beauty & Bargain Retail Is Set To Win Big In 2021: Wells Fargo

Shoppers line up outside Ulta Beauty before the 6 a.m. opening on Black Friday.

Aimee Dilger | LightRocket | fake images

Beauty and bargain retail is set to be the biggest winners in 2021 as consumers return to physical stores and get comfortable socializing again, according to a new survey by an investment firm.

Wells Fargo’s retail team recently surveyed 1,000 consumers in the United States to get a better idea of ​​their post-pandemic shopping behaviors. When asked which products they are most likely to buy first, after a pandemic, respondents selected makeup most often, with 40%. That even surpassed “clothes to go out”, which was chosen by 37%.

One of the biggest beneficiaries of this anticipated beauty rally could be Ulta, said analyst Ike Boruchow.

Ulta Beauty shares have risen approximately 70% in the last 12 months. The company has a market capitalization of $ 16.96 billion.

Ulta has said that it anticipates that same-store sales will grow in a range of 15% to 17% this year from 2020 levels. But it warned that its performance will continue to suffer as long as social distancing measures are maintained.

Wells Fargo expects sweat-wicking home and sporting goods consumption rates to decline this year. Both categories have outperformed in the last 12 months, with consumers stuck at home stocking up on sportswear for their fitness routines and redecorating their bedrooms and backyards with new furniture and accessories.

In the Wells survey, only 31% said they expected to buy sportswear in the short term, and 33% said the same about household items.

According to Boruchow, other winners in 2021 could be clothing retailers Urban Outfitters, Ralph Lauren and Gap, along with discount companies Burlington Stores, Ross Stores and TJ Maxx owner TJX.

The discounted price sector was in a tear before the pandemic. But its focus on finding bargains in stores has hampered performance during the health crisis, as many Americans stayed home. These companies also have less online presence.

As more shoppers return to stores to revamp their wardrobes, analysts like Boruchow hope Burlington, Ross and TJX can regain their share of the apparel market.

—CNBC’s Michael Bloom contributed to this report.


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