With the coronavirus causing unprecedented financial disruptions and a major shift in consumer spending, some retailers are seeing sales surge amid heightened demand but also face higher costs. Here’s what happened to major retailers in the first quarter during wide scale economic shutdowns.
As retailers adjusted to widespread coronavirus lockdown restrictions many experienced a huge surge in the growth of digital orders and e-commerce across the board.
Retailers have seen higher demand for groceries and household essentials during the pandemic which has helped drive increased sales, but customers are also foregoing higher-margin items like apparel.
A surge in online sales has resulted in extra costs (think packing and shipping) and a squeeze on profits.
Retailers operating during the pandemic are also facing higher costs related to additional pay for workers and store cleanings.
The company said its revenue and earnings fell in the first quarter, despite an initial surge in demand early on during the pandemic. Best Buy
As widespread lockdowns were put into place, Best Buy decided to shut its stores and switch to curbside pickup in late March. Online sales subsequently surged 154% from last year, the company said. In mid-April, the company said it would furlough 51,000 employees and take other cost-cutting measures, however.
The retailer had initially seen sales spike early in the pandemic as customers stocked up appliances and other supplies for their extended periods staying at home. CEO Corie Barry touted that Best Buy retained about 81% of last year’s sales during the last six weeks of the quarter, “even though not a single customer set foot in our stores.”
While Target’s stores stayed open during the first quarter many of its customers turned to online shopping. The company saw its same-store sales jump 10.8%, which was largely fueled by a surge in e-commerce—digital sales surged by 141%. Target reported profits of 59 cents per share on revenue of $19.6 billion in the first quarter, both of which topped analyst expectations.
Despite higher demand for groceries and household essentials during the pandemic, the coronavirus crisis has cut into Target’s profits with many shoppers skipping higher-margin items like apparel. The company has warned of increased costs related to the coronavirus—including higher pay for workers, store cleaning and other expenses—which have so far totaled roughly $500 million, CEO Brian Cornell said during the company’s earnings call.
Lowe’s stores were deemed essential amid the shutdowns as the spring season is the home improvement industry’s busiest time of year. The company’s same-store sales jumped 11.2%, compared to the 3.3% growth expected from analysts. Lowe’s reported profits of $1.77 per share on revenue of $19.7 billion, both of which beat Wall Street expectations. Online sales in particular have taken off; with capacity at stores reduced, Lowe’s has rolled out curbside pickup to accommodate digital orders.
Lowe’s said its financial position remains strong, having recently raised $4 billion in debt. CEO Marvin Ellison predicts that sales “will only get better” throughout the rest of 2020, with no expected downturn in demand because consumers will continue to invest in their houses despite the coronavirus. “I am also pleased with our ability to pivot to serve increased online demand with Lowes.com sales increasing 80% in the quarter,” Ellison said.
Big-box retailer Walmart saw its same-store sales jump by 10% in the first quarter, with a 74% increase in e-commerce sales as consumers stocked up on groceries and other essentials during the pandemic. The company beat Wall Street expectations by reporting profits of $1.18 per share on revenue of $134.6 billion in the first quarter. Walmart said it worked hard to keep up inventory as many products flew off the shelves: “For many of these items we were selling in two or three hours what we normally sell in two or three days,” CEO Doug McMillon noted.
While sales grew during the pandemic, the company’s costs did, too. Walmart spent nearly $900 million on expenses related to coronavirus; it hired more than 200,000 new employees to help clean stores, stock shelves and fulfill online orders. Walmart, along with many of its competitors, withdrew its financial outlook for the rest of the year. Its chief financial officer warned that the coronavirus has created “unprecedented variability” in the economy that could still impact sales.
Home Depot saw its sales rise sharply but first quarter profits were weighed down by extra costs. The company reported $28.3 billion in revenue, topping analyst expectations, with same-store sales growing 6.4%. Home Depot’s profits fell to $2.08 per share, below the $2.27 per share expected by Wall Street, as higher costs pressured the bottom line. Home Depot said it had spent $640 million after tax, or about 60 cents a share, on boosting wages and bonuses to keep employees coming into work during the pandemic.
Home Depot saw a boom in its e-commerce business during the pandemic. “As shelter-in-place orders rolled out across the country in mid- to late-March, we saw our digital businesses accelerate from approximately 30% growth in early March to triple digit growth in early April,” Ted Decker, vice president of merchandising, told investors. “During the last three weeks of the quarter, traffic to HomeDepot.com was consistently above Black Friday levels.”
Department store retail chain Kohl’s, which only recently reopened about half of its stores across the U.S., reported that its sales tanked almost 44% during the first quarter. The company, hard-hit by coronavirus shutdowns, was already struggling with declining sales before the outbreak. It declined to report same-store sales results in the first quarter because of its temporary store closures. Kohl’s reported a loss of $3.20 per share, with revenue falling to just under $2.2 billion—down from $3.8 billion a year ago. The retailer showed a net loss of $541 million, compared to a profit of $62 million a year before. It has about $2 billion in cash on hand.
“While we have a fast-growing digital business, it has only replaced a small portion of the sales loss from our entire store base,” CEO Michelle Gass said during the earnings call. Kohl’s digital sales were up 24% overall, with more than 60% growth in April—but those shipping costs hit profit margins.
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