Morgan Stanley is optimistic about the retail industry in 2026: Home Depot, Best Buy, and Wayfair are included in the key focus list

According to the Zhitong Finance APP, JP Morgan analyst Christopher Horvers conducted an in-depth analysis of the retail industry against the backdrop of multiple intertwined factors in the current consumer environment—including interest rate cuts, tariff adjustments, employment growth, accelerated wealth effects, and tax stimulus policies from a "beautiful big plan"—to identify companies with outstanding potential in a turbulent investment environment.

Horvers pointed out that four positive factors are expected to "resonate" in the first half of 2026, driving retail performance centered on home/goods to meet or even exceed market consensus expectations. Among these, robust wage growth, an extended product replacement cycle, and incremental net inflation benefits will be key catalysts for specific brand performance improvements.

At the company level, Horvers focused on the strong upside potential of Home Depot (HD.US) and Wayfair (W.US). He observed that recent real estate market data has shown signs of improvement, and the "headwinds of consumer spending inclination" that previously affected consumer spending are gradually dissipating. Coupled with expectations of further interest rate cuts by the Federal Reserve, this has created a favorable environment for these two companies.

For Home Depot, Horvers emphasized that it remains one of the "best long-term investment targets" in the retail industry, primarily based on the company's own growth-driving initiatives, excellent corporate culture, and ongoing investment in store innovation. Wayfair, on the other hand, is expected to achieve a growth rate that surpasses its peers due to the accelerated development of long-term online retail trends. Currently, both companies have been included in JP Morgan's "Positive Catalyst Watch List."

Similarly affected by the real estate market cycle, Best Buy (BBY.US) exhibits a similar correlation logic in Horvers' analytical framework, particularly in categories such as home appliances and televisions. Notably, the replacement cycle for tablets is expected to bring benefits to Best Buy—these products account for 33% of its sales.

Horvers specifically pointed out that current investors may underestimate the potential of the technology product replacement cycle and the close correlation between Best Buy's sales and the real estate market, thus holding a positive attitude towards the company.

Horvers' analysis predates President Trump's announcement on September 26, 2025 (last Friday) regarding the imposition of tariffs on imported furniture, cabinets, and bathroom sinks. Horvers believes that although the additional costs may pressure Wayfair's profit margins, consumer demand is unlikely to be suppressed as a result.

Wayfair's strong online business system, management's commitment to cost control, and its advantageous product mix and supply chain capabilities as the largest online specialty retailer in the industry are expected to trigger a long-term turning point for upward adjustments in profit expectations.

Additionally, companies are gaining competitive advantages over their peers by optimizing platform functions through artificial intelligence technology and upgrading logistics systems (such as the ecosystem built by the CastleGate logistics platform).

For Home Depot, its risk exposure is smaller—the company has taken significant measures to reduce reliance on foreign suppliers, and most products in its diversified supply chain layout are sourced from the U.S. This provides flexibility in cost management and pricing strategies, allowing it to effectively absorb potential price shocks, such as the cost fluctuations brought about by recent tariff policies