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With excess cash on hand from years of cautious spending and slower store growth, retailers in 2012 will focus on returning capital to investors via share buybacks and dividends, according to a Credit Suisse report released Tuesday.
Firm's analysts estimate that share buybacks will reach $36.2 billion next year. That’s a slight decline from $37.4 billion in 2011, but well above $20.7 billion in share repurchases seen in 2008.
While capital spending is expected to increase, it will be nowhere near peak levels of 2006-2007.
Beyond share buybacks and dividends, retailers are also expected to focus on international growth, e-commerce, marketing programs (including loyalty programs), and remodels.
Offering automotive parts retailer AutoZone as an example, the report underscores that buybacks work best when combined with strong company fundamentals—supporting stock through lower earnings years and amplify earnings improvement in the better years.
For 2012, the report calls Home Depot and Lowe’s as the most interesting names in the retail space.
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