How to shop for retail stocks ahead of the new year?
- Cowen's Oliver Chen recommends picking retail stocks with pricing power.
- A few of the names he likes include Macy's, Costco, LVMH, and Brilliant Earth.
- The U.S. retail sales climbed by 0.3% in November versus 1.8% in October.
Inflation in the United States jumped to a record in almost four decades last month, and Cowen’s Oliver Chen says investors should pick retail stocks with pricing power in such an environment.
Chen’s remarks on CNBC’s ‘Squawk on the Street’
The S&P Retail Select Industry Index has slid over 15% in less than a month, but Oliver is still positive on retail. On CNBC’s “Squawk on the Street”, he said:
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The retail season has been elongated. Shoppers came into the stores earlier. We had a very successful Black Friday; lowest clearance levels I’ve seen in five years or more. It’s a gift-giving season, as well as dressing up again and going out. So, we’re quite positive because of low unemployment.
Names he believes can withstand inflationary pressures include Macy’s, LVMH, and Brilliant Earth. Chen also likes Costco as it’s good at “managing value”. He’s particularly bullish on LVMH because it owns Sephora, and the beauty space, Chen said, has been particularly “powerful”.
What else does he like in the retail space?
According to CNBC, 48% of the shoppers who started early this year on fears of supply constraints picked eCommerce for convenience. Naturally, Chen said, retailers with a strong digital platform like Target and Walmart could benefit from it. He also added:
In the return of the mall, we have noticed attractive traffic trends. Still below 2019 levels slightly, but the average check size and the prices have been very strong. And the beneficiaries there would be Tapestry and Capri.
Also on Wednesday, U.S. retail sales for November came in shy of the prior month. Retail sales climbed by 0.3% last month versus 1.8% in October. It was the fourth straight month of increase in U.S. retail sales.