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Wage Growth-Led Savings Likely to Benefit US Footwear, Apparel in 2022 Amid Possible Inflation, Omicron Headwinds, Wedbush Says

1:49PM ET 1/04/2022 MT Newswires
The US footwear and apparel industry is expected to benefit from strong demand this year amid wage growth-driven savings, while inflation and the omicron variant of the coronavirus pose potential headwinds, Wedbush Securities said Tuesday.

US consumers have accumulated some $2.9 trillion in "excess savings" since the start of the pandemic, suggesting consumer finances remain "very strong," Wedbush analysts led by Tom Nikic said in a note.

"While spending has returned to pre-pandemic levels, wage growth has outpaced spending growth," according to Nikic. "We view these excess savings as 'dry powder' that the consumer has available for spending."

However, inflation fears could depress consumer spending on apparel and footwear in 2022, especially if people end up paying more on food, energy, housing and consumer staples, the analyst said.

In addition, the highly transmissible omicron variant could result in "a short-term impact on consumer behavior," like complicating the return-to-office process, limiting social gatherings and hurting the tourism recovery, according to the note.

However, a major fundamental shift is unlikely as the strain's mild symptoms should help avoid or limit economic shutdowns.

RealReal (REAL) could see a greater focus on margins and profitability this year, with the online marketplace's new chief financial officer in a position to play a key role in a potential turnaround, Wedbush wrote. The company appointed Robert Julian as CFO, effective Oct. 1. The brokerage upgraded the company's rating to outperform from neutral and lifted the price target to $21 from $16.

The brokerage raised 2022 and 2023 earnings estimates for Skechers USA (SKX) while increasing its price target to $54 from $47 amid solid fundamentals and governance changes possibly unlocking value. Wedbush upgraded the footwear company to outperform from neutral.