These five retail stocks could be winners with stimulus checks set to go out this month

Published Tue, Mar 9 202110:48 AM EST

Retailers that were closed to foot traffic during the first round of stimulus checks last year could see more upside as more $1,400 payments hit bank accounts, Evercore ISI found. The brokerage noted that while investors may be tempted to snap up stocks that outperformed in April and May of last year, they instead should consider investments in retailers with brick-and-mortar locations that had been shuttered in spring of 2020. Specifically, analyst Omar Saad recommended a collection of apparel retailers and some luxury brands that could be set for strong same-store sales growth in 2021 after the Covid-19 pandemic forced many to shutter locations last spring. He highlighted off-price retailers TJX Companies , Burlington Stores and Ross Stores . TJX is the parent of TJ Maxx and HomeGoods. Locations operated by those three companies "were closed during last year's stimulus, so were not able to benefit from the influx of cash (none of the Off-pricers has a meaningful ecommerce business) last April," Saad wrote in a note. "We think Off-price could be a top destination for stimulus check spending in April." The teen and sneakers categories could also prove good ways to play the stimulus trade, Evercore said, since the average part-time teen employee working 20 hours per week likely saw their weekly income more than double by going on unemployment. The $1.9 trillion stimulus bill that the Senate passed over the weekend is expected to make its way to President Joe Biden's desk as soon as later this week after the House votes to approve the latest draft. The legislation would send $1,400 checks to millions of Americans, extend per-week federal unemployment benefits of $300 and appropriate $350 billion for state and local governments. With those added benefits expected to roll out in a matter of days, Evercore advised clients to look out for outperformance in Foot Locker and Nike as consumers look to buy new athletic footwear into the warmer months. "Teens/young adults, many of whom are making more money on [unemployment] are a key customer base," Saad wrote. Last year, Foot Locker "saw its strongest growth quarter in 2Q as UI flooded young adults' wallets, posting +17% growth," he wrote.

A T.J. Maxx store in Cincinnati

Ty Wright | Bloomberg | Getty Images

Retailers that were closed to foot traffic during the first round of stimulus checks last year could see more upside as more $1,400 payments hit bank accounts, Evercore ISI found.

The brokerage noted that while investors may be tempted to snap up stocks that outperformed in April and May of last year, they instead should consider investments in retailers with brick-and-mortar locations that had been shuttered in spring of 2020.

Specifically, analyst Omar Saad recommended a collection of apparel retailers and some luxury brands that could be set for strong same-store sales growth in 2021 after the Covid-19 pandemic forced many to shutter locations last spring.