June 6, 2023

Retailers’ stocks have spit the bit this year as soaring inflation and interest rates have sparked concern about consumers’ buying power.

The S&P Retail Select Industry Index has dropped 27% year to date. But Wells Fargo analysts see opportunities among defensive plays.

“In the wake of a decidedly mixed first-quarter-earnings season, it’s clear that hard-line retail categories are feeling the pinch across multiple fronts,” they wrote in a commentary.

Macro Uncertainty, Inflation

That includes “rising macro uncertainty and a sharply inflationary backdrop,” they said. It also includes “signs that bigger ticket, discretionary goods may finally be falling out of favor after two-plus years of outsized pandemic-fueled growth.”