Retailers to watch in 2019

By MarketsFOXBusiness

Stores getting creative with promotions this holiday season

RetailMeNot retail expert Marissa Tarleton on the biggest trends this holiday shopping season.

When it comes to retail, 2019 might be the year of the brick-and-mortar store.

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Sales at physical store locations are expected to rise more than 3 percent, according to a survey from IBM.

Clothing, pharmacies and restaurants are all expected to see gains, IBM forecasts.

Other firms agree. Moody’s Investors Service recently raised its outlook to Positive from Stable for the U.S. retail industry for the first time since 2015, with analysts saying they don’t believe Amazon will be able to steal the industry’s competitive advantage any time in the near future.

The ratings agency estimates only about 15 percent of sales are completed online.

However, some retailers have been able to adapt to shifting retail trends better than others – and are poised to flourish in 2019.

Here’s a look at some of the biggest winners for the coming year:

Walmart

Retail giant Walmart will continue to see a “payoff from sizable investments it has made for growth,” Moody’s said.

The firm noted Walmart’s acquisition of Jet.com is one way the company has expanded its online platform, and it will “continue to be a force” in the digital space.

Additionally, the company has focused on investing in food – which “remains a compelling product to drive traffic.”

As Amazon’s presence in the sector has ramped up pressure to offer new shipping and delivery options, Walmart expanded its two-day shipping options to “millions” of new items sold by third-party retailers throughout the holiday season.

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Costco

Membership-only warehouse club Costco Wholesale Corp. is another brand that is likely to do well next year.

According to Moody’s, discounters and warehouse clubs will generate $25.9 billion in 2019, making up just shy of one-quarter of the retail sector’s total earnings power.

Analysts say the company has successfully been able to leverage its membership base. It reported net income of $767 million during its most recent fiscal quarter. Net sales were $34.3 billion.

Shares are up more than 5 percent so far this year.

Dollar Tree

Moody’s cited dollar stores as an area of strength in 2018 – a trend it expects to continue through the coming year.

Income among dollar stores is estimated to grow by 5.8 percent and the discount retailers are expected to comprise 4 percent of the sector’s overall earnings potential next year.

Moody’s named Dollar Tree as one brand poised to take advantage of these trends.

The company’s most recent quarterly report showed a net sales increase of 4.2 percent to $5.54 billion. Same-store sales also rose by more than 2 percent. However, it lowered guidance for the full fiscal year net sales to as much as $22.83 billion compared with previous estimates between $22.75 billion and $22.97 billion.

Kroger

Supermarket chains are likely to achieve sizable growth next year, especially when compared with 2017 and 2018, Moody’s estimates.

Kroger, a large player in the space, is poised for higher same-store sales growth. Moody’s named the “Restock Kroger” plan, which involves store remodeling and technology enhancement, as a tailwind.

Analysts pointed to investments in meal kit provider Home Chef and an online British grocer as strategic moves that could enhance its positioning. Investments in the pharmacy business also boost the company’s outlook.

Moody’s forecasts Kroger’s operating profits will rise to about $450 million by 2020.

Others

In addition to the names listed above, Moody’s forecasts that Target, Amazon, AutoZone, Dollar General, Albertsons, T.J. Maxx, Bass Pro, Ross Stores and O’Reilly Automotive will all perform well in 2019.