Wells Fargo recently said the post-coronavirus world would create a “new normal” for the retail industry.
The bank said the global pandemic would likely cause americans to leave urban apartments and move more to the suburbs, setting the stage for the success of some retailers.
“Our general view is that [long-term] trends will continue to favour retailers with scale, secular advantages, strong liquidity and flexibility to navigate the changing retail landscape.””Wells Fargo senior analyst Zachary Fadem told clients.
Retail has been one of the hardest hit sectors during the coronavirus outbreak.With the government forcing the economy to close, bricks-and-mortar retailers have been forced out of business, with little way to generate revenue and huge rents to pay.But the investment bank said the growing popularity of ordering from home in a few states, particularly in the southeast, was creating a new “normal” for the shopping experience.
In the post-coronavirus world, many people will leave the cities and move to the suburbs for more space and lower population density.As a result, Wells Fargo argues, society will deurbanize, “offsetting many years of demographic structural shifts toward densely populated cities and toward more spacious suburbs and rural areas.”
The Wall Street bank said Home improvement companies Home Depot (HD) and Lowe’s (LOW) would be the two biggest beneficiaries of the trend.Wells Fargo has an overweight rating on the shares.The investment bank also said Tractor Supply (TSCO) would get a boost from the new trend.
“In contrast to the renewed interest in suburbs, car ownership is likely to be higher than interest in mass transit and/or ride-sharing,” Fadem said.
With the rise of ride-sharing companies and urbanization, young americans didn’t need to own a car.Wells Fargo, however, thinks this is changing in the post-coronavirus world.
While car ownership is back in vogue, Wells Fargo also likes “out of date” stocks such as Autozone (AZO), O ‘reilly Automotive (ORLY) and Carvana (CVNA).
“Rural/suburban travel destinations (schools, jobs, families) have driven up dependency on owning cars compared to mass transit or ride-sharing,” Fadem said.”We believe these factors could accelerate miles traveled across the country, even as employees increasingly work from home.”
Wells Fargo also believes that e-commerce will accelerate after the outbreak ends, with americans working from home becoming more of a norm.
So the company says they think Bed Bath &;Beyond (BBBY), Michael’s (MIK) and At Home Group (Home) face a bright future.