Shoppers raided grocery store shelves in 2020, stocking up their pantries and dining increasingly at home as the COVID-19 pandemic spread.

Now analysts and investors are concerned that sales will come back down to Earth in 2021, driving comparable sales declines across the sector.

“Food and discount retailers were COVID-19 winners in 2020 on the dramatic shift to at-home-related consumption that drove unprecedented grocery sales as well as strength in household, electronic, outdoor, home exercise and solitary leisure general merchandise,” wrote Bank of America analysts led by Robert Ohmes.

“2021 will be a year of tough comparisons that begins with the cycling of last year’s peak grocery stockpiling in March.”

Beyond the retailers, the brands sold at grocery stores are also raising concerns.

Shares of home care giant Procter & Gamble Co. are already feeling the squeeze, down nearly 3% this week and almost 5% over the past month, despite reporting a quarterly sales increase on Wednesday.

P&G brands include Tide laundry detergent, Dawn dish soap and Bounty paper towels.

Truist Securities raised a warning flag about the months to come.

“This was another solid quarter for the company, in our view, and P&G has had very strong business momentum over the past year,” analysts led by Bill Chappell wrote.

“However, with the focus of investors shifting to the more difficult comparisons coming in the spring and the stock’s strong run over the past 12 months, we believe the strong business results are already factored in the stock price at these levels. We believe P&G, like many other large-cap HPC [home and personal care] and food names will need to show it can have a soft landing in the spring and summer before their stocks can move meaningfully higher.”

Truist rates P&G stock hold and cut its price target by $10 to $140.

Morgan Stanley analysts say many of the companies that have benefitted from COVID-19, including food retailers, have “overcomped,” reaching peak margins and valuations.

“Grocery is among the weakest positioned as the category likely shrinks in ’21 ahead of below average growth in ’22,” wrote analysts led by Simeon Gutman in a Wednesday note.

Morgan Stanley downgraded Kroger Co., Albertsons Cos. Inc. and Ollie’s Bargain Outlet Holdings Inc. to underweight from equal weight.

While the grocery category could suffer in 2021, some retailers like Walmart Inc.,Target Corp., Costco Wholesale Corp. and BJ’s Wholesale Club Holdings Inc., which sell groceries, are more insulated thanks to technology like mobile apps, services like curbside pickup and low prices, according to Bank of America.

These retailers also have other business areas, like marketplace platforms and ventures into healthcare and financial services, to attract customers. The membership models at retailers like Costco and BJ’s are also a plus.

Bank of America analysts are more optimistic about Albertsons.

” Albertsons remains buy rated and a top value pick,” analysts said.

“[A]s a destination food retailer with a growing suite of omnichannel offerings, we view Albertsons as well-positioned to drive share gains post crisis given its earlier stage initiatives (vs. Kroger) including merchandising, digital, Own Brands and loyalty programs.”

The Consumer Staples Select Sector ETF is up 1.8% for the past year. The S&P 500 index has gained nearly 16%. And the Dow Jones Industrial Average is up 6.8% for the period.

Source: MarketWatch