Beauty and bargain retail could be the biggest winners in 2021, Wells Fargo predicts

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Shoppers line up outside of Ulta Beauty before the 6am opening on Black Friday.
Aimee Dilger | LightRocket | Getty Images

Beauty and bargain retail are poised to be the biggest winners in 2021 as consumers return to brick-and-mortar stores and get comfortable socializing again, according to a new survey by one investment firm.

Wells Fargo’s retail team recently polled 1,000 consumers in the United States to get a better sense of their post-pandemic shopping behaviors. When asked which products they are most likely to buy first, post-pandemic, respondents most frequently selected makeup, at 40%. That even surpassed “going-out apparel,” which was chosen by 37%.

One of the biggest beneficiaries of this anticipated rebound to beauty could be Ulta, analyst Ike Boruchow said.

Ulta Beauty shares are up about 70% over the past 12 months. The company has a market cap of $16.96 billion.

Ulta has said it anticipates same-store sales to grow in a range of 15% to 17% this year from 2020 levels. But it has cautioned that its performance will continue to be impacted so long as social-distancing measures remain in place.

Wells Fargo expects the consumption rates of sweat-wicking athleisure and home goods to slow this year. Both of these categories have outperformed over the past 12 months, with stuck-at-home consumers stocking up on athletic garb for their fitness routines and redecorating their bedrooms and backyards with new furniture and accessories.

In Wells’ survey, only 31% said they expected to buy athleisure in the near term and 33% said the same about home goods.

According to Boruchow, other winners in 2021 could be the apparel retailers Urban Outfitters, Ralph Lauren and Gap, along with off-price businesses Burlington Stores, Ross Stores and TJ Maxx owner TJX.

The off-price sector was on a tear prior to the pandemic. But its focus on bargain hunting in stores has hampered the performance during the health crisis as many Americans stayed home. These companies have less of a presence online, too.

When more shoppers return to stores to refresh their wardrobes, analysts like Boruchow expect that Burlington, Ross and TJX stand to win back market share in apparel.

—CNBC’s Michael Bloom contributed to this reporting.

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