WMT - Big Box Retailers Determined to Save Christmas
Last week, we got to see how retail is doing as big names reported their earnings, including Target (NYSE: TGT), Walmart (NYSE: WMT), Kohl’s Corporation (NYSE: KSS), Macy’s Inc (NYSE: M), The TJX Companies Inc (NYSE: TJX), Lowe’s Companies Inc (NYSE: LOW) and Foot Locker (NYSE: FL). Their results showed that supply chain disruptions did not overshadow strong demand.
Target
The big-name retailer reported positive results but shares fell as it is focused to absorb some of the higher costs it’s seeing, as opposed to passing them on to customers, a praise-worthy strategy that squeezes margins. But it raised its annual forecasts and beat profit expectations, citing an early start to holiday shopping as moments such as Halloween and back-to-school boosted sales.
Walmart
Also on Tuesday, another big retailer flagged a hit to their third-quarter margins from supply chain issues. But it’s no secret that Walmart has been doing great for quite a while. Sales are expected to continue growing 5% over the holiday season at its home US market which translates to an addition of $30 billion to its annual sales footprint after an already extraordinary 2020. But an even better sign of a strong Q4 ahead is that inventory jumped 12% YoY which in normal circumstances would be a red flag, but are a great asset in times of accelerating demand that comes with the holiday quarter in a an environment shaped by supply shortages. Unsurprisingly, Walmart topped analysts’ expectations and raised its guidance for the year.
Home Depot
Another big box retailer who topped both revenue and earnings estimates as consumers fixed or upgraded their homes. Consumers have been spending more and investing in their homes due to a strong housing market that helped both Home Depot and its rival Lowe’s. Home prices climbed nearly 20% compared to a year ago. Halloween also boosted the results as the viral 12-foot skeleton returned after being sold out last year. Strong demand is still very much present in the undergoing quarter with the retailer offering deals not only on Black Friday but throughout the period.
Lowe’s
Boosted by online sales that grew 25% and demand from home professionals, a segment led by Home Depot, Lowe’s managed to beat expectations as Americans continue to do renovations despite the increased cost of construction materials. It is also launching Livable Home and tapping into a new market to become a “one-stop shop” for baby boomers who want to age in place. The home improvement retailer also raised its full year outlook due to higher demand from builders and contractors, as well as a strong U.S. housing market.
Kohls
The department store’s 16% sales increase confirms consumers are buying clothes and makeup again. It partnered with Sephora to lure in customers and also raised its forecast for the year due to better-than-expected performance.
Macy’s
The struggling department store revealed it plans to shut 10 department stores in January while delaying other closures. It is reconsidering the closing dates of roughly 60 of its remaining open stores as it wants to stay physically present. These closures are part of a batch of 125 scheduled to go dark by 2023 as digital performance is stronger in the markets where the company has physical stores.
TJX
TJX is one of those retailers that bucked the trend as everything is looking great. Demand is strong going into the holidays, the off-price selling model is working even as more shopping moves online. Despite higher wages and costs, profits improved compared to pre-pandemic levels. Although COVID-19 related challenges are still clouding the short-term growth picture, a great 2021 finish is on the horizon as TJX secured enough high-quality products to keep shelves fully stocked in stores and on the e-commerce platform through the crucial holiday shopping season.
Foot Locker
The shoe retailer posted impressive results, with the top and the bottom-line increasing YoY and exceeding estimates. Despite supply chain challenges, the company registered growth due to a robust back-to-school season and strong customer relationships.
This week
As for the undergoing shortened Thanksgiving week, it’s Gap Inc (NYSE: GPS) and Urban Outfitters Inc (NYSE: URBN) turn with the latter revealing on Monday its retail store sales declined although online sales led to profit and sales beating expectations.
Outlook
The most wonderful time of the year is also the most important quarter of the year for retailers due to holiday shopping. Many were concerned that supply chain disruptions such as shipping issues and shortages will derail what is usually the strongest quarter. But, it seems this quarter will tell a tale of how retailers saved the holiday season as they have taken all the steps not to let COVID steal Christmas nor their profit.
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