The next round of stimulus could come soon but big retailers are already benefiting from the $600 check that many Americans have received from the latest bipartisan package, RBC Capital Markets notes.
Analyzing consumer data from the week ending January 24, RBC's Scot Ciccarelli notes that various industries were given a boost, with the biggest beneficiaries being retail and grocery stores. Retail spending in the week surged 22% past the level of a year ago.
However, smaller businesses aren’t benefiting. Ciccarelli said more than a third of small businesses have closed since January 2020. While the first stimulus package signed into law by President Donald Trump in March 2020 helped smaller companies, sales started to fall off again in the summer.
Now, there’s another opportunity for big chains that own more assets and have gained market share amid the pandemic.
“Given the broad-based pickup in spending from the stimulus, we expect almost every company in our coverage to follow a similar pattern, and would specifically call out Dollar General (DG) and Dollar Tree (DLTR)/Family Dollar as key beneficiaries considering the outsized spending boost in low-income ZIP Codes,” Ciccarelli said.
Last month, I recommended taking a look at retailers including Dollar General (NYSE: DG) and Dollar Tree (Nasdaq: DLTR), as well as some bigger ones like Walmart(NYSE: WMT) and Target (NYSE: TGT). While most of these stocks haven’t seen much gains since, they’ll still be worth checking out ahead of the next stimulus package getting potentially passed.
Meanwhile, there’s still one big hurdle that needs to be resolved for the next stimulus package: Who receives the $1,400 checks? The Democrats have control of Congress (meaning they can pass legislation without a Republican vote) but some party lawmakers want checks to start phasing out for those earning $50,000 a year. That’s tighter than the $75,000 that was agreed upon in the previous package.
Also, it appears as if President Joe Biden has given up the fight on the $15 minimum wage hike he proposed for now, as so-called "moderate conservative Democrats" like Joe Manchin oppose it.
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