- Moody's analysts expect more growth ahead for the retail industry, albeit at a less frenetic pace than 2021, according to a recent report.
- For 2022, Moody's projects operating income to grow 2% across the U.S. industry. That is down considerably from the spike in operating profit growth this year, which Moody's expects to near 30%.
- Moody's also projects sales growth across the retail industry under 5% next year, compared to the projected growth of more than 10% in 2021. Analysts said e-commerce would "continue to be the primary growth engine" for U.S. retail.
Going into 2021, retail had few places to go but up in terms of sales and profit metrics. With many chains closing for some two months during the early stages of the pandemic, anything but growth this year could have been rightly called a disaster for the industry.
Instead of disaster, the industry's comeback came even faster than many expected, helped along by vaccines, employment rebounds and stimulus. Consumer demand has been so robust it has in many cases outstripped the global supply chain's ability to stock shelves.
Financial markets, after a swoon early in the pandemic, have been very active as well. They have helped retailers of all financial profiles bolster their liquidity and refinance their debt. That has kept many out of trouble, with bankruptcies in the industry hitting lows not seen in years.
None of which to say there are no more risks in the system. Moody's analysts pointed to debt levels in the industry that have "climbed to unprecedented highs," in part because of actions taken during the pandemic to keep companies afloat during store closures and demand weakened by the pandemic. The Moody's team said the debt levels "create repayment risks where growth and earnings prospects weaken or liquidity wanes."
Continued supply chain disruptions and a shift in consumer spending to more experience-based consumption present risks to the industry as well, the analysts noted.
For individual sectors, Moody's expects some of the high fliers of the pandemic era to return to earth somewhat. They project big-box players' operating profits, for example, to go from nearly 30% growth between 2019 and 2021 to an estimated -2.2% contraction next year.
On the other hand, the analysts expect online retail to keep up a steady pace of growth, and for online penetration to pass 30% in the next five years.