Retail Stock Darlings Are on Borrowed Time

The latest earnings season showed retailers of all stripes, not just e-commerce companies, have been winners in the pandemic. Inc. is reaping a windfall, as are emerging e-commerce stars such as Wayfair Inc. and Etsy Inc. But physical giants such as Home Depot Inc. and Target Corp. and athleisure apparel company Lululemon Athletica Inc. have reported stellar earnings too.

This is partly because fiscal relief passed by Congress has supported household incomes despite the rise in unemployment. But it’s also because, as Target’s CEO noted, consumer spending that would have gone to in-person activities such as travel or dining has gone into buying physical products instead.

The risk to these companies — and to investors who have sought refuge from the pandemic in their shares — is what happens once there’s a vaccine and consumer spending shifts back to in-person activities. That normalization process will be good news for the economy overall but bad news for retailers that have benefited from this year’s disruption.

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So many retailers have thrived in the pandemic that we can think of them holistically in a behavioral sense, rather than just dividing them into traditional themes such as e-commerce or home improvement. Recreation vehicle sales are up as would-be travelers see them as safer than airplanes and hotels. Swimming pool makers have benefited as people try to relax at home. Yoga clothes and athleisure are in, while business suits are out, as work-from-home employees prioritize comfort over office attire…  Yahoo! Finance

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