Omicron vs retail: industry expert weighs in

The Omicron-related fear in the retail space is being reflected in the shareholders, but the consumer side remains strong, says industry expert Jan Kniffen.

Kniffen’s remarks on CNBC’s ‘Squawk Box’

The SPDR S&P Retail ETF (XRT) has slid roughly 15% in just over a month, but Kniffen says retail traffic continues to be promising. This morning on CNBC’s “Squawk Box”, he said:

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All the reports I’m getting back say traffic is holding up; it’s surprisingly good, given Omicron. The retailers and developers running malls that I talk to all the time are saying they thought they might see some impact from Omicron, but they haven’t yet.

Kniffen cited gift card sales that are up 43% on a year-over-year basis to forecast a strong ending for the retail sector this year and continued strength into 2022. Last week, Cowen’s Oliver Chen said retail investors should pick companies with pricing power amidst the inflationary pressures.

Why was there a post-thanksgiving dip then?

On a year-to-date basis, XRT is still up nearly 35%. According to Kniffen, the post-thanksgiving dip was mostly related to the supply constraints that made many shop earlier this year. Otherwise, he added, both traffic and spending were holding up.

We’re seeing very strong conversion this week at the mall. I think my 12.5% number or the National Retail Federation’s 11.5% number for year-over-year growth will be good numbers despite Omicron. I thought that might destroy the back end, but it doesn’t seem to be happening.

Omicron has become the dominant strain in the United States in less than a month, accounting for about 73% of the new COVID cases, but the retail mogul is convinced sales will remain strong even after the Christmas period.