A fresh serving of economic data this week revealed challenges the retail sector incurred during the final months of 2021, including a larger-than-expected drop in retail sales reported on Friday.
U.S. retail sales dipped by 1.9% in December, the most in 10 months, as the retail sector weathered a mix of supply chain issues, staffing shortages due to the Omicron variant, and inflation.
Even in this challenging environment and perhaps beyond the pandemic, one type of retailer may be poised to gain market share, JPMorgan retail analyst Matt Boss told Yahoo Finance Live on Thursday, the day before the latest retail numbers were released. The analyst believes Americans' new penchant for wearing activewear and jeans every day could even outlast COVID-19.
“As you look category by category, I think the No. 1 [retail] theme that played out over the pandemic — which was strong into the crisis, and may actually take [market] share after the pandemic — it's casualization,” Boss said. "You're even seeing it here in the workplace. So I think the active and denim players come out of this in a much stronger market share position with a larger total addressable market."
Nike (NKE) and Lululemon (LULU) in particular may benefit from this trend, Boss said, as could Levi's (LEVI) and American Eagle (AEO). He also noted that Under Armour (UA) could become "a very interesting catch-up play within the athletic space."
In light of record-high inflation, Boss also noted that discount stores like TJ Maxx (TJX), Ross (ROST), and Burlington (BURL), may do well in the near future because the dollar will go farther in those stores.
"Look, it's fact that inflationary costs are a reality. And that's also facing the consumer," he said. "And so it's going to cost more money at the grocery store. There's no question it's going to cost more money to fill up your car at the gas station. Heating costs are higher. So as you think about where the consumer is pressed, to me, value becomes king."
We'll know more about the state of retail when retailers begin releasing their fourth-quarter earnings in the next few weeks.
Bradley Smith is an anchor at Yahoo Finance. Follow him on Twitter @thebradsmith.