2021 was a whirlwind year for retail.
Supply chain meltdowns, record high inflation, and staff shortages made it clear which brands could adapt and which ones would fall to the wayside.
As 2021, comes to a close, uncertainty persists, especially with the most recent uptick COVID-19 cases across the U.S. Still, analysts and market watchers are hopeful for some brands to maintain their momentum. We reached out and asked them about where they see businesses heading in 2022 and what stocks they recommend watching out for.
Below are their picks for the best stock buys in 2022.
LULU — Lululemon
Activewear was a major trend throughout 2020 and 2021, as people at home sought a blend of comfort and style. According to a note from Jane Hali & Associates, LLC Investment Research, activewear will continue to be a dominant trend in 2022, which puts Lululemon in a strong position for next year. In addition to its apparel offerings, Lululemon is also set to start selling its brand new footwear line in early 2022, which experts say could be a major competitor for more established brands.
SHOO — Steve Madden
Steve Madden has posted fantastic results throughout 2021. In November, the company delivered the highest-ever quarterly sales and earnings in the firm’s history. For the third quarter, revenue increased 52.4% to $528.7 year-over-year and increased 5% compared with 2019. Net income was $66.6 million, or $0.82 per diluted share, up 22% from 2019. At the time, analysts said the company’s success will likely be even greater once supply chain delays and congestion are cleared. In a report outlining his stock picks for 2022, BTIG analyst Camilo Lyon called out Steve Madden and other fashion brands as a stock to watch in 2022.
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“We expect fashion focused businesses will disproportionately benefit from the recovering spend in going out categories, specifically in apparel and footwear/accessories,” the report read.
TPR – Tapestry
Lyon also highlighted Tapestry as another stock to watch in 2022. In November, the New York City-based parent company of Coach, Kate Spade and Stuart Weitzman announced results from another strong quarter. In a call with investors, executives maintained an optimistic outlook ahead of the holidays thanks to a strong inventory position, rising demand for products and effects from the company’s Acceleration Program, which leverages data and analytics to improve omnichannel capabilities.
All three of Tapestry’s brands delivered a higher AUR, or the average price per unit at retail, in Q1. For Coach, the company’s largest brand, Q1 marked the 10th consecutive quarter of AUR growth in North America.
As more people return to in-person events and dressing up, analysts believe companies with luxury, higher-end offerings like Tapestry will stand to benefit.
NKE — Nike
Jessica Ramirez with Jane Hali & Associates (JHA) said that the supply chain challenges and factory shutdowns that have plagued the footwear industry in 2021 will likely persist into 2022. However, she noted that footwear will eventually emerge back to its strong position, thanks to strong demand for certain brands, especially Nike. While JHA is “Neutral” on Nike, other analysts expressed confidence in the brand’s outlook in the wake of its recent earnings report in December.
The athletic giant reported revenues and earnings for Q2 that beat expectations.
In a note to investors after earnings were published, Williams Trading analysts Sam Poser gave Nike a “Buy” rating and said that “the global health of the Nike brand has never been better, and continues to improve.” In his analysis, he said he expects Nike to “gain market share, in a more profitable manner than its competitors in both the short and long term.”
WMT — Walmart
Walmart, like other big box stores, was a clear winner throughout the pandemic. In the company’s most recent Q3 earnings report, Walmart posted earnings and revenue numbers that beat analysts’ expectations.
Walmart executives said the retailer has flexibility when it comes to distributing higher prices across categories, which allows for competitive yet profitable pricing in a highly inflationary environment. Walmart also managed to work through supply chain slowdowns by securing product early and chartering vessels to prepare for Q3 and Q4. Walmart also saw hiring gains amid a widespread retail industry labor shortage, and added over 200,000 new associates in the Q3, executives said in a call with investors. 25% of these new hires were in supply chain roles, with the rest working in stores.
According to Neil Saunders, managing director of GlobalData, Walmart will “benefit from inflation and from the various investments into ranges and e-commerce,” which makes it a strong stock pick moving into the new year.
“The winners in 2022 will be those companies that can build growth on top of growth,” he said.
CPRI — Capri
According to Lyon, three themes will characterize which stocks will do well in 2022: inventory availability, strong design and value proposition, and pricing power.
Capri Holdings, parent company to the Michael Kors, Versace and Jimmy Choo brands, falls in line with each of these themes, Lyon said. The company delivered strong quarterly results in November for Q2 and raised its forecast.
Capri Holdings chief John Idol said in the company’s most recent earnings call that prices at Michael Kors will continue to go higher as promotions wane.
“We’ve shown that we make more on lower sales than we did on having higher sales and trying to chase our own selves or other competitors. So we’ve made the decision, prices are going higher, we’re going to have less promotional activities and we’re going to let the consumer respond to that,” Idol said.
