The government reported last week that U.S. retail sales rose 0.7% in July, a sign of strength in the sector. But with other recession predictors flashing red, it’s worth considering what investors should do with retail stocks in the event of a recession.
Loop Capital Markets analyst Anthony Chukumba looked back to the last recession in 2008 for answers. In that downturn, the top performers tended to be companies that catered to people who had fallen on hard times. Dollar stores outperformed, as did rent-to-own retailers. Fewer people had access to credit, so they depended more on companies allowing them to pay for things in installments.
Among the group he covers, Dollar General stock (ticker: DG) saw the largest gains in same-store sales in 2008, though Chukumba attributes that in part to the fact that the company was going through a reorganization under private ownership at the time. Dollar Tree stock (DLTR) also saw its same-store sales accelerate during the downturn. (READ MORE)
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