Retail store closings hit a record in 2019, and though it may not have reached the 12,000 or so that had been predicted, the shape of the industry has likely been permanently altered. And even after two dozen major bankruptcies, the retail apocalypse may not end for another two years. That is enough of a signal to convince most investors that retail is a sector to avoid, but savvy investors know the carnage has not been even and that some retailers are not only surviving, but thriving in this landscape. Knowing where to look is key.
What eMarketer notes is a common theme running through most of these retailers is that not only are many discount retailers — Aldi, Dollar General, Dollar Tree — they also specialized in generic merchandise for the most part. You can find name brand goods at the dollar stores and the deep discount grocers, but their primary sales are in private label and off-brand names. Indeed, even at major supermarkets such as Walmart and Kroger, private label merchandise is growing four times faster in the United States year over year than national brands, according to IRI data.
Surveying retail’s wreckageThe rise of e-commerce has shifted consumer discretionary buying habits so that even the Christmas sales season isn’t as important as it used to be. November and December used to be when most consumers shopped, and the holiday season is still important for retail spending. But data from Coresight Research show that the advent of “shopping holidays” — especially Amazon.com‘s annual Prime Day extravaganza in July and related sales from other retailers trying to piggyback on Amazon’s efforts — has caused consumers to shift their spending away from the last two months of the year. Where the November-December period used to account for almost a quarter of spending in 1998, it has since fallen to 21% in 2018, and likely will be even lower this year. After all, Amazon sold an estimated $6 billion worth of goods on Prime Day in 2019, a 50% increase over the year before. But that doesn’t mean investors should only look online for stocks to buy. It’s in the world of brick-and-mortar that arguably some of the best investment gems are hidden.
Finding the common denominatorAlthough we can blame Amazon for the demise of many retailers, other physical retailers are growing. Using data from IHL Group, eMarketer listed the top 10 retailers that are opening stores.
|Rank||Retailer||Store Openings 2019|
|2||Dollar Tree (NASDAQ:DLTR)||500|
|1||Dollar General (NYSE:DG)||975|