It's been a brutal year for retailers. Dozens of well-known names have filed for bankruptcy in the course of the coronavirus pandemic, including popular department stores that malls and shopping centers rely on as anchor tenants. In fact, the fear among real estate investors is that if retailers continue to struggle in 2021, widespread store closures will be inevitable, taking down shopping centers and mall real estate investment trusts (REITs) in their dust.
But all is certainly not lost on the retail front. In fact, here are three retailers with the potential to do extremely well in the coming year.
1. Home Depot
The stay-at-home boom has been a good thing for Home Depot (NYSE: HD). With so many people forced to work remotely, homeowners have been spending money to set up home offices in addition to the home-improvement projects they've taken on in an effort to occupy their time.
As such, Home Depot had a fantastic third quarter, with revenue of $33.54 billion versus the $32.04 billion Wall Street analysts expected. Meanwhile, U.S. same-store sales soared 24.6% last quarter compared to a year prior.
All of this has happened despite the supply-chain issues that Home Depot and other home improvement chains have had to grapple with. Earlier this year, a major lumber shortage had the potential to hurt Home Depot, but the retailer powered through.
Since the stay-at-home trend is likely to continue well into 2021, Home Depot sales are likely to hold steady or even pick up. Furthermore, low mortgage rates have spurred an uptick in buyer demand, and as more homes move off the market, there will be more projects to tackle, which contributes to the likelihood of a successful 2021 for Home Depot.
Being both an essential retailer and one-stop-shop has worked wonders for Target (NYSE: TGT) this year. Online and in-store sales climbed 20.7% during 2020's third quarter, and the retail giant ended the quarter with an impressive $22.63 billion in revenue.
In the past nine months, Target has improved the way it makes purchases available to consumers. Between its Shipt service offering same-day delivery, regular shipping, and curbside pickup, it's done an outstanding job of catering to customers during the pandemic. And with this network in place, Target has the potential to soar even higher in 2021. The retail giant is also working to expand its product line, partnering up with Ulta Beauty to market itself as a cosmetics and self-care hub.
3. Dick’s Sporting Goods
Americans have had a lot of free time on their hands in 2020 as social gatherings, concerts, and sporting events have largely been off the table. As such, there's been a shift to personal fitness, and Dick's (NYSE: DKS) has managed to capitalize on it.
Dick's had an outstanding third quarter, with revenue of $2.41 billion, higher than the $2.2 billion analysts projected. Same-store sales also increased by 23.2% year over year, which was a record for the company.
The individual fitness trend is likely to continue into 2021, as gyms remain a precarious place to visit. And from a less positive point of view, many Americans have put on weight during the pandemic from being stuck hunkering down at home, and a large number may seek to shed those pounds in the coming year. Dick's could therefore serve a number of crucial needs in 2021 as the public does its best to stay healthy, or get healthy, after a trying 2020.
Though the outlook for 2021 may seem bleak for real estate investors, these three retailers are clearly the exception. And seeing as how they all have the potential to serve as shopping-center (and in the case of Dick's, mall) anchors, investors may not have to give up hope just yet.