The trend line on jigsaw puzzles and dried beans is looking bullish, so just wait until the pandemic is over!
Of course that is a ridiculous conceit, but it is also one that to some degree is playing out on Wall Street, where analysts are predicting companies that saw their sales jump during the Covid-19 crisis will keep doing better.
Sales at
for example, rose by 38% last year from a year earlier, as people avoiding in-person shopping turned to the e-commerce giant. Analysts polled by FactSet expect its sales to grow by 23% this year. Online marketplace
did even better, riding not just the e-commerce wave, but a cottage mask-selling industry. Its sales rose 111% in 2020, and analysts think they will rise another 25% this year.
And so it goes. Analysts think that
will have another stellar year of growth in 2021, that
Costco’s
business will be great and that, even though you ordered more pizza in the past year than you previously thought possible, Domino’s sales will continue to expand.
What makes this situation difficult for investors is that these are all stories that could end up being at least partially true. The pandemic reshaped the economy in ways that we won’t fully understand until well after the pandemic has passed. Maybe people won’t buy as many dried beans over the next year but, having learned how to cook them, it is feasible that dried beans will sell better than they did pre-pandemic from here on out.
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E-commerce sales, for example, shot to 14% of retail sales last year from 11% a year earlier, according to the Commerce Department. With Americans more at ease buying things online that they never bought online before, much of those market-share gains could persist.
Further complicating the situation, while some business categories’ share of spending over the next year might shrink, the spending pie looks as if it could get significantly bigger. Americans have bulked up their savings during the Covid crisis, and the $1.9 trillion relief package that President Biden signed on Thursday will provide even more money. As the crisis eases, a lot of spending will likely be directed at categories people have been missing out on, such as restaurant meals and family trips, but at least some will go toward things such as replacing the Scrabble set the pandemic puppy chewed.
Even taking that into account, however, it seems like a lot of the areas that have done well over the past year could be in for some sort of hangover. Commerce Department figures show that consumer spending on games, toys and hobbies last year rose 19% from 2019, while spending on personal computers and related equipment rose 15% and spending on video streaming and rental services rose 23%. Much or all of the coming years’ growth might have been pulled forward by people working, studying and forced to entertain themselves at home.
Moreover, while analyst estimates reflect an expectation that many companies that benefited from the pandemic will continue to thrive, they also show that companies that got walloped by it will rebound smartly. For example, sales at Olive Garden owner
are, by the quarter that ends this November, expected to exceed its sales during the same period in 2019. Of course the analysts who cover Darden aren’t the same as the analysts who cover Netflix, but maybe they should talk.
Write to Justin Lahart at justin.lahart@wsj.com
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