Show Transcript
As the vaccine rollout evolves around the world, the trajectory of the pandemic will undoubtedly continue to shape the retail industry landscape. Anthony Okolie speaks with Anita Bruinsma, Consumer Discretionary Analyst, TD Asset Management, about the retail trends emerging in 2021.
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[MUSIC PLAYING]
- Anita, let's start with the big picture in the retail industry. Specifically, what's been going on in terms of consumer spending through the pandemic?
- Well, consumer spending and retail sales have actually been surprisingly strong through the pandemic. If we look at the entire year of 2020, retail sales were actually higher in the US and Canada than they were in 2019. And this is really surprising, considering the level of unemployment, lack of consumer confidence, and a lack of access to stores.
But there are two nuances I think we need to really pay attention to here. One is that, of course, the spending was more on goods and services, because services weren't available. And the second is that we shouldn't take these numbers as an indication that consumers are necessarily healthy. We have two cohorts of consumers here, those who kept their jobs and saw their savings rates increase, and those lower income people, where most of the job losses were, they were really kind of suffering through this.
And so what's really been supporting spending, has been those people who kept their jobs and had savings, and those lower end consumers were spending the stimulus checks they were receiving from the government. And they were also receiving more generous unemployment benefits. So that's really what helped spending in 2020.
- And I want to pick up on that thought, because certainly last year, as you mentioned, people were working from home, and they're probably spending money on fixing up their homes, and delaying experiences like traveling. Do you see those same patterns holding up in 2021, or do you see that changing given we've got the vaccine roll outs coming?
- Well, I think the first part of 2021 is looking a lot like 2020. We are still at home. People are still spending on the same categories. Those categories you talked about in the past, furnishings, home decor, pets, electronics, I think those are going to continue to be strong in the beginning of the year.
But as we move through the year, and we see those rays of sunlight as the vaccine is rolled out, that's going to shift. Categories are going to shift certainly back to services as restaurants reopen for dining, as other services recover, and as travel recovers as well. So I think we're certainly going to see that shift. I think it should still be a bit of a rocky ride. I think overall spending can do quite well.
And that's going to be driven by that savings that we've seen build up in the higher end consumers, but the lower income consumers have certainly been financially damaged through this recession, and it's going to take longer for them to recover. And so that might weigh a little bit on sales, but certainly, we're going to see a shift back into services this year.
- OK. So with that outlook in mind, who are the next winners in the consumer space?
- So yeah, we talked about last year's winners, all the stay at home names. But those are certainly-- that's yesterday's story. And as investors, of course, we're always looking forward. Who are the next winners? And I really see three winners, and they're all related to leave the home, instead of staying at home.
The first is restaurants. People have been buying a lot of groceries, have been doing a lot of cooking. And quite honestly, I think people are tired of that. They're tired of eating their take out at their dining room table. And the surveys show us that they want to go back to restaurants. They want to have the atmosphere, and they want to see their friends. So I think dine-in restaurants are going to be a really big category this year.
The second is hotels. And I think domestic travel can recover quite nicely in 2021, people traveling within their own country. And this will be really good for hotels. And then we have the recovery in international travel, and eventually, corporate travel, which could take longer, it'd be the end of 2021, or maybe even into 2022 and 2023. So that makes for an elongated recovery cycle for hotels.
And then the third category, which is exciting, is apparel and footwear. As people go back out to restaurants and see their friends again, they're definitely going to want new clothes, and dressier clothes. We're all tired of our hoodies and our leggings. So people are going to want to go shopping. And similarly with footwear, when you're on Zoom, no one cares what's on your feet. But as we go back out, we're going to want to buy new footwear. So I'm pretty excited about that category, especially in the spring and summer of this year.
- Yeah, I think we're all excited about that. How have these stocks performed in light of expectations for reopening? And secondly, how are you thinking about investing in the consumer sector right now?
- Well, the market is always forward looking. They're always looking for the next trend. So when Pfizer announced that it expected it's vaccine to be very effective back in the fall, all of these sectors and stocks got a really nice-- I guess, shot in the arm. Pardon the bad joke. And a lot of these stocks are at, or even above, their pre-COVID levels at this point.
So it does make it kind of hard, a bit tricky to pick stocks. But if we look two or three years out, do I think these stocks can trade higher? Yes, absolutely. I do think so. I think there is a huge amount of pent up demand. We have that massive savings that people have accumulated. And I think investors are going to be really excited to see the recovery in revenues and earnings going out.
So it could be a bit of a rocky ride through the year. But if you're an investor, that has a bit of a longer term horizon, two to three years, and you have some patience, I think there are some really great opportunities in the consumer sector this year.
- Anita, thank you very much for your insights.
- You're welcome, Tony.
[MUSIC PLAYING]
- Anita, let's start with the big picture in the retail industry. Specifically, what's been going on in terms of consumer spending through the pandemic?
- Well, consumer spending and retail sales have actually been surprisingly strong through the pandemic. If we look at the entire year of 2020, retail sales were actually higher in the US and Canada than they were in 2019. And this is really surprising, considering the level of unemployment, lack of consumer confidence, and a lack of access to stores.
But there are two nuances I think we need to really pay attention to here. One is that, of course, the spending was more on goods and services, because services weren't available. And the second is that we shouldn't take these numbers as an indication that consumers are necessarily healthy. We have two cohorts of consumers here, those who kept their jobs and saw their savings rates increase, and those lower income people, where most of the job losses were, they were really kind of suffering through this.
And so what's really been supporting spending, has been those people who kept their jobs and had savings, and those lower end consumers were spending the stimulus checks they were receiving from the government. And they were also receiving more generous unemployment benefits. So that's really what helped spending in 2020.
- And I want to pick up on that thought, because certainly last year, as you mentioned, people were working from home, and they're probably spending money on fixing up their homes, and delaying experiences like traveling. Do you see those same patterns holding up in 2021, or do you see that changing given we've got the vaccine roll outs coming?
- Well, I think the first part of 2021 is looking a lot like 2020. We are still at home. People are still spending on the same categories. Those categories you talked about in the past, furnishings, home decor, pets, electronics, I think those are going to continue to be strong in the beginning of the year.
But as we move through the year, and we see those rays of sunlight as the vaccine is rolled out, that's going to shift. Categories are going to shift certainly back to services as restaurants reopen for dining, as other services recover, and as travel recovers as well. So I think we're certainly going to see that shift. I think it should still be a bit of a rocky ride. I think overall spending can do quite well.
And that's going to be driven by that savings that we've seen build up in the higher end consumers, but the lower income consumers have certainly been financially damaged through this recession, and it's going to take longer for them to recover. And so that might weigh a little bit on sales, but certainly, we're going to see a shift back into services this year.
- OK. So with that outlook in mind, who are the next winners in the consumer space?
- So yeah, we talked about last year's winners, all the stay at home names. But those are certainly-- that's yesterday's story. And as investors, of course, we're always looking forward. Who are the next winners? And I really see three winners, and they're all related to leave the home, instead of staying at home.
The first is restaurants. People have been buying a lot of groceries, have been doing a lot of cooking. And quite honestly, I think people are tired of that. They're tired of eating their take out at their dining room table. And the surveys show us that they want to go back to restaurants. They want to have the atmosphere, and they want to see their friends. So I think dine-in restaurants are going to be a really big category this year.
The second is hotels. And I think domestic travel can recover quite nicely in 2021, people traveling within their own country. And this will be really good for hotels. And then we have the recovery in international travel, and eventually, corporate travel, which could take longer, it'd be the end of 2021, or maybe even into 2022 and 2023. So that makes for an elongated recovery cycle for hotels.
And then the third category, which is exciting, is apparel and footwear. As people go back out to restaurants and see their friends again, they're definitely going to want new clothes, and dressier clothes. We're all tired of our hoodies and our leggings. So people are going to want to go shopping. And similarly with footwear, when you're on Zoom, no one cares what's on your feet. But as we go back out, we're going to want to buy new footwear. So I'm pretty excited about that category, especially in the spring and summer of this year.
- Yeah, I think we're all excited about that. How have these stocks performed in light of expectations for reopening? And secondly, how are you thinking about investing in the consumer sector right now?
- Well, the market is always forward looking. They're always looking for the next trend. So when Pfizer announced that it expected it's vaccine to be very effective back in the fall, all of these sectors and stocks got a really nice-- I guess, shot in the arm. Pardon the bad joke. And a lot of these stocks are at, or even above, their pre-COVID levels at this point.
So it does make it kind of hard, a bit tricky to pick stocks. But if we look two or three years out, do I think these stocks can trade higher? Yes, absolutely. I do think so. I think there is a huge amount of pent up demand. We have that massive savings that people have accumulated. And I think investors are going to be really excited to see the recovery in revenues and earnings going out.
So it could be a bit of a rocky ride through the year. But if you're an investor, that has a bit of a longer term horizon, two to three years, and you have some patience, I think there are some really great opportunities in the consumer sector this year.
- Anita, thank you very much for your insights.
- You're welcome, Tony.
[MUSIC PLAYING]
