Dollar stores will be the biggest winners in 2020. Moody’s Investors Service predicts dollar stores will see 9.5% growth in operating profit, compared to 3.2% in 2019. Dollar stores benefit from consumers seeking value, but the sector also stands out because it has not been disrupted by e-commerce. For most of the retail sector, costs associated with e-commerce investment will put pressure on profits, along with price wars in the competition to gain market share. Moody’s cut its outlook for the U.S. retail, apparel and restaurant industries from positive to stable to reflect those pressures.
Moody’s still projected a strong year for retail as low unemployment and wage growth boost consumer confidence. Operating income growth for retailers is expected to improve to between 3% and 4% in 2020, from 2% to 3% in 2019. Some sectors will see a slight slowdown in operating profit growth next year, including discounters and warehouses. But the only sector poised to contract are department stores, which have struggled to adapt to the growth of online shopping.