US Retail Meets The Pandemic

US Retail Meets The Pandemic

about 3 years ago3 mins

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US retailers have been reporting their third-quarter earnings lately, and they’ve mostly come in above expectations. But who knows what the post-pandemic world could have in store for all these… stores?

🕰 Recap

  • Walmart was one of the first big US retailers to report earnings, and its update was better than expected
  • Lowe’s followed suit, but the home improvement retailer didn’t manage to live up to analysts’ forecasts
  • US department store Macy’s came out with earnings that were better than predicted, but there were worrying signs for the future
  • And on Tuesday, US consumer electronics retailer Best Buy rounded things off with expectation-busting results

✍️ Connecting The Dots

There’s one big reason for US retailers’ generally pretty positive results: ecommerce. Online sales at Walmart, Lowe’s, and Best Buy were almost double what they were the same time last year – which isn’t particularly surprising, given that Americans are doing more and more of their shopping from the comfort of their own homes. But there were also signs of increasing costs, with some companies raising wages and giving bonuses to their staff. And that’s to say nothing of all the COVID-proofing they’ve had to cough up for…

But zoom out from these results for a second, and you’ll see there are clear winners and losers from the pandemic. On the one hand, you have those that have flourished by serving shoppers’ needs – either by selling boredom-killers (like Home Depot, Best Buy, and Dick’s Sporting Goods have done) or by offering one-stop shopping experiences (like “big box” retailers Walmart and Target). The latter, in particular, have done a great job of boosting their market share by offering everything from beauty to everyday essentials.

And on the other hand, you have those that haven’t met the moment: struggling clothing outlets and department stores like Macy’s, for example, which have been trying – and failing – to convince sweats-wearers everywhere to upgrade their closets.

🥡 Takeaways

With overall US retail sales missing expectations in October, investors have been looking for signs of how retailers will hold up during the all-important holiday sales season. And they don’t have to look far: the National Retail Federation is expecting holiday sales to grow by between 3.6% and 5.2% from the same time last year – compared to the 3.5% average growth over the last five. Gift-buyers this year, after all, are likely to spend more money on “wrappables” than they are workshops, sporting tickets, and vacations. Investors might also look toward China’s Singles’ Day for a hint: the world’s biggest one-day shopping event raked in a record-breaking $115 billion in sales for Chinese ecommerce giants JD.com and Alibaba earlier this month.

Retailers might’ve delivered strong third-quarter earnings, sure, but a lot of investors sold their shares regardless. That might be because they’re concerned the companies won’t be able to sustain the momentum they’ve gained from stay-at-home trends. Investors, it seems, are suspicious that lockdown is bringing out the DIYer and golfer in everyone, and that the motivation for those pastimes might start to dwindle when things open up again. And that might be why retailers like Best Buy and Home Depot saw their shares drop after their otherwise positive third-quarter earnings updates.

🎯 Also On Our Radar

Bitcoin went from highs not seen since 2017 to suffering its biggest drop since the beginning of the pandemic this week. But not to worry: the cryptocurrency is still up around 130% for the year. That might be because of more interest among professional investors: an exchange-traded note (ETN) which tracks a Bitcoin index just listed on the stock market this week.

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