Stay-at-home retail trades are in the 'early innings,' retail analyst Dana Telsey says

They're among the retailers thriving during the pandemic: Amazon, Walmart and Home Depot.

And, long-time retail analyst Dana Telsey believes they have plenty of runway left.

"It is going to be about home, active and electronics, and I think discounters had a terrific second quarter," the Tesley Advisory Group CEO & chief research officer told CNBC's "Trading Nation" on Tuesday. "We're still more in the early innings of it."

Telsey suggests the stay-at-home trend is part of a sustainable, structural change that will continue beyond the pandemic.

"Home is going to continue to be a winner," she said. "It's an office, an exercise center, an entertainment and now an education center also. I think consumers are basically re-investing in the remodels of their homes for a prolonged period of time."

She highlights Walmart, which reported quarterly numbers this week that beat the street, as a standout. It reported e-commerce sales surged by 97%. 

"Walmart is gaining share in terms of consumers — especially given their locations and the proximity. I think they've got the benefit of stimulus," said Telsey. "They're winning at logistics and distribution along with product."

Along with discounters stocking essentials, Telsey sees electronics and active clothing in a profitable place.

"Let's not forget we're going to get Best Buy next week," she added. "Electronics will probably win, too, given what we're seeing out there with computers, laptops, iPads – everyone is bolstering their connectivity at home and WiFi access."

Telsey's bullish case for athleisure stems from the typical work, play and live-at home dress code.

"Active clothing overall has proven to certainly be even a little bit more fashionable lately," she noted. "Foot Locker will still benefit. Dick's will still benefit. I think LULU [Lululemon] is going to continue to benefit also, and then the brands. I mean take a look at Nike because they will be a beneficiary."

But, there's an important caveat to Telsey'sforecast. It relies on a key ingredient: A second virus relief package.

"We saw what a boost it was in the first half of 2020. We need it in the second half especially when we're seeing that unemployment is still not making great strides," Telsey said. "Given that consumer spending accounts for two-thirds of the economy, we need consumers to get out there and spend."

On Tuesday, the S&P 500 consumer discretionary index saw a record close. Over the past 3 months, it has surged more than 25%.

Disclosure: Telsey Advisory Group provides investment banking, other non-investment banking securities related services, and non-securities services and may seek such relationships from retail companies.

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