10 Retailers and Restaurants That Will Thrive This Winter

It’s hard to believe it, but the worst of the COVID-19 pandemic may still be upon us. Epidemiologists have warned that cases could spike as the weather turns colder, and case counts already are rising in much of the country. Meanwhile, outdoor gatherings will become more difficult, impacting sectors like restaurants, many of which have survived with the help of outdoor dining.

Without a vaccine, in other words, the sluggish consumer-facing economy will get even slower in the coming months. Nonetheless, there are a number of retailers and restaurants that look poised to thrive even when the weather turns colder. Keep reading to see 10 of them.

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Known for its everyday low prices and a wide range of products both essential and discretionary, the retail giant has long been recession-proof. Americans depend on Walmart (NYSE: WMT) as the country’s biggest grocery seller for their everyday needs, and that relationship has only strengthened during the pandemic as grocery sales have spiked with Americans mostly avoiding eating out.

Looking to the colder months ahead, Walmart should do well thanks to its robust supply chain, low prices, and investments in e-commerce infrastructure like grocery pickup and delivery, which allow customers to shop without having to step into a store.

CEO Doug McMillon recently implored Congress to pass another stimulus deal, but even without a stimulus package, Walmart’s sales should continue to grow for the duration of the crisis.

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The home-improvement sector has boomed during the pandemic as the extra time at home has motivated Americans to spend on their living spaces, adding home offices, upgrading appliances, and improving outdoor spaces, among other changes.

According to the Census Bureau, sales at building material and supply retailers jumped 17.2% in the third quarter, and Home Depot has been a big beneficiary as its sales and profits spiked in its most recent report.

Winter is typically a slow time of year for its stores as construction and DIY work takes a breather, but retailers like Home Depot say that two-thirds of their spending is nondiscretionary, for needed repairs and maintenance, meaning that business should still be better than the typical winter season. That’s especially true as Americans who are working and learning from home may be more motivated to spend on winterizing their homes, purchasing things like insulation, weatherproofing, new windows, or snow removal equipment.

The pandemic has been crushing for casual-dining chains and independent restaurants, but a number of fast-food chains have adapted to the new environment and performed well.

Chipotle Mexican Grill (NYSE: CMG) is a perfect example. The burrito chain’s investments in digital infrastructure and delivery partnerships have paid off as sales rebounded into positive territory as early as June, and the company said in its second-quarter earnings call that comparable sales were up 6.4% in the first three weeks of July.

Digital sales in the second quarter more than tripled and made up 61% of total revenue, showing that demand has simply shifted between channels. During the winter months, that digital advantage could deliver an even bigger boost as food delivery sales tend to spike during the winter as Americans spend more time at home and are less likely to eat out. That’s likely to be the reality this year because of the pandemic, and investors seem to be anticipating a surge at Chipotle as the stock is up 61% this year.

Auto parts retailers have thrived during the pandemic as the typically recession-proof industry has seen a surge in spending in recent months.

In part, retailers like AutoZone (NYSE: AZO) seem to be benefiting from the same kind of trend that is lifting home-improvement sales as consumers, with extra time and money on their hands, are spending to improve their cars.

But a couple of other trends are also boosting retailers like AutoZone, which reported 21.8% in comparable sales in the most recent quarter. First, spending at auto parts stores tends to increase during recessions as consumers delay new car purchases, using their dollars instead on repairs. Second, during the pandemic, there’s been an interesting twist on this pattern. Used car sales have spiked as Americans look to get their own set of wheels to avoid using public transportation or ridesharing vehicles during the pandemic, which has helped drive a surge in business for chains like AutoZone. Those trends should continue to boost spending, especially as winter is typically the hardest season on your car.

ALSO READ: Best Consumer Discretionary Stocks for 2020

Membership-based warehouse retailer Costco (Nasdaq: COST) is another essential retailer that looks poised to thrive over the coming months.

Costco’s sales have boomed in recent months as its combination of bulk goods at bargain prices has been a winner at a time when consumers around the world are stocking up on groceries and other goods to limit shopping trips. Additionally, the company’s big stores and wide aisles, which make social distancing easy, have proven to be an asset during the crisis, as have the company’s investments in e-commerce, partnering with Instacart for same-day delivery for perishables and offering two-day delivery on nonperishables with a $75 minimum.

Comparable sales actually accelerated in September, rising 16.9%, which bodes well for continued growth into the winter as circumstances around the coronavirus are unlikely to change.

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Perhaps no retailer has done better during the coronavirus pandemic than Tractor Supply (NYSE: TSCO), the largest rural lifestyle retailer in the U.S.

Tractor Supply’s product line checks a lot of the coronavirus boxes, including outdoor and work wear, farming and gardening products, pet products, and power tools. Its positioning around “stay-at-home” activities helped drive comparable sales up a whopping 30.5% in the second quarter, while earnings per share rose 61%. Management expected that trend to continue into the third quarter, forecasting comparable sales growth of 12%-18%. While its sales peak in warmer months of the year, the winter is shaping to be a strong one for Tractor Supply as the focus on investing in the homestead is likely to persist at least until there’s a vaccine.

Pizza delivery has become a time-tested business model, and the crucible of the pandemic has proven its success once again. Domino’s (NYSE: DPZ) sales have surged during the crisis as people around the world have turned to the chain for convenience and value, growing fatigued with cooking for themselves.

Comparable sales in the third quarter rose 17.5% in the U.S. and 6.2% internationally as stores have been closed at times in some international markets. Delivery tends to grow more popular in the winter months, and the return of sports, including the NFL, should also help Domino’s as pizza delivery often complements such events as it’s a comfort food, easy to share, and easy to eat in front of the TV.

ALSO READ: The Difference That Helps Domino's Deliver More Than Pizza

Target (NYSE: TGT) cuts a unique profile as a big-box chain as the company carries a wide range of products like Walmart and Costco, but is more skewed toward discretionary items like apparel and home goods and less to groceries, which make up a majority of sales at Costco and Walmart. Target is also known for its private brands and its “cheap chic” strategy, giving the company an edge during the pandemic.

Consumers flock to its stores, located in both rural communities and inner cities, and stock up on both essential items like food and medicine and things like clothes and electronics, as both categories grew by double digits even as clothing sales plunged across the retail sector.

Target’s investments in same-day fulfillment services like Shipt and curbside pickup have also given the company an advantage as sales from same-day fulfillment jumped nearly 300% in the second quarter, helping to drive comparable sales up 24.3% in the period. That momentum should continue to benefit the company in the coming months, especially during the holidays as convenience is a top customer priority.

One of the biggest surprises in retail has been Michaels, the nation’s largest arts-and-crafts retailer. Shares of The Michaels Companies (Nasdaq: MIK) actually fell as low as $1 during the crash in March but have rebounded to double digits as the once-struggling company has seen impressive sales growth, driven by Americans spending more time at home.

Comparable sales increased 12% in its most recent quarter as e-commerce sales jumped more than 300%. Adjusted operating income rose 41%, meanwhile. Michaels sales tend to spike in the fourth quarter, due to gift-giving and decorating around the holidays. And the combination of colder weather and the pandemic should be especially beneficial to the retailer this year as Americans are likely to turn to Michaels for at-home hobbies during a time when activities like eating out, socializing, and traveling are difficult.

Rounding out the list is Wingstop (Nasdaq: WING), a purveyor of take-out wings that has been on fire during the pandemic. Like pizza, chicken wings is another popular delivery concept that has many of the same advantages.

In its third quarter, Wingstop said comparable sales jumped 25.4%, showing the company is absorbing market share from a wide range of restaurants, even other fast-food chains. Digital sales in the period rose 62% and systemwide sales were up 32.8% to $509.2 million as it continues to open new stores.

Wingstop is poised to finish its 17th consecutive year with comparable sales growth, showing it managed to grow during the last recession as well.

Its combination of a simple menu, comfort food, and good value seems to be a winning one, and like Domino’s, it should also benefit from the presence of live sports, especially the NFL, over the coming months.

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While most restaurants and retailers have been losers during the coronavirus pandemic, the list above shows that a number of chains are booming during the crisis. Retailers that provide essential goods or those that fill a specific need during the pandemic, as well as restaurants that excel at delivery and comfort food, have shown that even in some of the hardest-hit sectors, there are ways of delivering growth.

Expect these companies to continue to thrive during the winter and for the duration of the pandemic.

Jeremy Bowman owns shares of Chipotle Mexican Grill and Target. The Motley Fool owns shares of and recommends Chipotle Mexican Grill, Home Depot, and Tractor Supply. The Motley Fool recommends Costco Wholesale, Domino's Pizza, The Michaels Companies, and Wingstop. The Motley Fool has a disclosure policy.