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Coronavirus Wave: Diverts From Retail Shops, Drums Up Online Sales

It’s been a while now since the coronavirus pandemic began taking a toll on a plethora of industries across the globe, and the retail space is no exception. The deadly contagion continues to bankrupt several struggling companies. Meanwhile, the recent spurt in COVID-19 cases is raising concerns about retail recovery while it simultaneously strengthens the e-commerce adoption.

According to eMarketer, total retail sales in the United States are expected to decline 10.5% in 2020 with a 14% fall in the bricks-and-mortar store sales. However, as consumers are increasingly opting for digital purchases, e-commerce sales are projected to shoot up 18% this year.

Earlier in February, the market research company that provides insights and trends into digital marketing, media and commerce had anticipated the figure to register 2.8% modest growth following which, the coronavirus mess induced a dramatic decline in consumer spending activity whilst creating a new landscape for online retailers and e-commerce. 

Per the US Ecommerce 2020 report by eMarketer, the click-and-collect format, especially curbside pickup, is the main catalyst for ecommerce sales, which allow customers to make purchases online and pick them up with minimum human interaction. The firm forecasts U.S. click-and-collect e-commerce sales to witness a 60.4% uptick from the initial estimate of a 38.6% surge for 2020.

The 18% increase in e-commerce sales projection for 2020 highlights a spike in average spending per buyer. It also showcases a noteworthy shift to online shopping by new buyers including a 12.2% footfall rise from those aged 65 and above.

Although some of the shifts across multiple categories and formats might moderate over the year, post the relaxation of coronavirus-induced lockdowns and the gradual reopening of the economy, formats like click-and-collect and curbside pickup are here to stay.

Recently, CFRA Research, one of the world's largest independent investment research firms, drafted in a W-shaped retail recoveryin the United States with an estimate of 8% decrease in retail sales for 2020 and a 3% improvement envisioned for 2021. In the U-shaped turnaround scenario, the firm predicts retail sales to deteriorate 6% in 2020 and inch up 4% in 2021. The less probable V-shaped revival is expected to witness a 4% slip and a 5% uptick in 2020 and 2021 retail sales, respectively.  

Principal Picks

The COVID-19 outbreak affected consumer behaviour to a great extent whereby buyers are spending more on the essential goods and changing gears to online shopping, away from the bricks-and-mortar stores. E-commerce sales are soaring across multiple categories and formats.   

Given the present scenario, we fathom that it is better to invest in consumer-centric and e-commerce stocks with a strong growth potential. That said, we zeroed in on five healthy stocksfor a rewarding investment portfolio. Each stock currently has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eBay Inc.EBAY operates as an online shopping site that allows visitors to browse the products listed for sale or auction through each company's online storefront. The company has a trailing four-quarter positive earnings surprise of 6.20%, on average, and a Zacks Rank of 1, presently. 

Big Lots, Inc. BIG is a broad-line closeout retailer in the United States. The company offers products under various merchandising categories, which include Food, Consumables, Furniture, Seasonal, Soft Home, Hard Home, Electronics and Toys & Accessories. The company has a trailing four-quarter positive earnings surprise of 62.15%, on average. It is presently a Zacks #1 Ranked player.   

Etsy, Inc.ETSY offers e-commerce services and provides both online and offline marketplaces to buy and sell goods. The company's product line comprises art, home and living, mobile accessories, jewellery, wedding merchandise, et al. The Zacks Consensus Estimate for current-year earnings has seen three upward revisions in the past 60 days. It is presently a #1 Ranked player. 

Ollie’s Bargain Outlet Holdings, Inc. OLLI, based in Harrisburg, PA, is a value retailer of brand-name merchandise at throwaway prices. The company sells wares at prices up to 70% lower than the rates available at department and fancy stores, and up to 20-50% below the mass-market retail rates. The company has a trailing four-quarter positive earnings surprise of 4.65%, on average. It currently sports a Zacks Rank of 1. 

Headquartered in Seattle, WA, Amazon AMZN is one of the largest e-commerce providers in the world. The company is benefiting from its Prime program, delivery and logistic system in the e-commerce space. Further, its dominant position in the cloud market is a boon. The company has a trailing four-quarter positive earnings surprise of 8.71%, on average. It presently carries a Zacks Rank #2. 

 

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