The divide between retail's winners and losers in the pandemic
widened this week
By Sarah Nassauer and Suzanne Kapner
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 20, 2020).
The coronavirus pandemic has widened the gap between retail's
winners and losers, boosting the fortunes of big U.S. chains that
were able to stay open throughout the pandemic and feed America's
basic needs.
The evidence was stark this week as national retailers revealed
they were exiting the summer months heading in different
directions. On Wednesday, Target Corp. reported the strongest
quarterly sales growth in its history, while Lowe's Cos.' sales
growth was the strongest in decades. Meanwhile, chains like Kohl's
Corp. and T.J. Maxx that had to temporarily shut their doors posted
sharp sales declines.
Like rival Walmart Inc., Target has benefited as coronavirus
concerns fueled demand for services that let shoppers pick up goods
in parking lots or skip trips to the store. Both companies also
sell groceries and other household staples that have been in demand
as Americans cook and clean more in their homes.
Target executives cited broad gains across categories such as
food, electronics and home goods and a rebound in clothing sales in
the quarter ended Aug. 1. "In the current environment, each of our
categories are performing very well," Chief Executive Brian Cornell
said on a call with reporters.
Target's online sales nearly tripled from a year ago. Walmart,
which is a global retailer and much larger in terms of revenue,
said its U.S. e-commerce revenue nearly doubled in the latest
quarter.
On the flip side, TJX Cos., the parent of off-price chains T.J.
Maxx, HomeGoods and Marshalls, said quarterly sales fell 32% as its
stores were closed for nearly a third of the quarter due to the
Covid-19 pandemic. L Brands Inc., whose Victoria's Secret and Bath
& Body Works stores were shut for much of the quarter, posted a
20% drop in quarterly sales.
Shares of Target jumped more than 12% in Wednesday trading to
new highs, while TJX shares slid 5%. Shares of Walmart, Lowe's and
L Brands were little changed.
Government stimulus checks and extra unemployment benefits
helped the locations that were open. Executives at several
companies told investors that sales growth has slowed in recent
weeks as those benefits were reduced.
U.S. consumer retail spending collapsed in March and April, when
restrictions to stem the spread of Covid-19 required many stores to
shut. Government data have since recorded three straight months of
spending gains at restaurants and stores as many businesses
reopened.
Big chains such as Target, Walmart and home-improvement chains,
along with e-commerce giant Amazon.com Inc., have been among the
biggest beneficiaries of new shopping habits and increased spending
on homes and food. Home Depot Inc. said U.S. comparable sales rose
25%, while Lowe's posted a 35% jump.
Walmart's U.S. comparable sales rose 9.3% in the most recent
quarter, bringing its global revenue to $137.7 billion. Target said
its comparable sales jumped 24% and total revenue reached $22.9
billion in the quarter. Profits were also ahead of Wall Street's
expectations at both companies.
Smaller chains and traditional department stores, many forced to
close during the early days of the pandemic, aren't faring well.
Lord & Taylor, J.C. Penney Co. and Stage Stores Inc. have all
filed for bankruptcy protection since May. Last week, off-price
chain Stein Mart Inc. filed for chapter 11 with plans to close most
of its roughly 280 stores.
L Brands said on average its Victoria's Secret's stores were
closed for about 70% of the quarter, while its Bath & Body
Works chain was closed for about half the quarter. It has since
reopened most of its North American stores, though in some virus
hot spots they are only open for curbside services.
TJX, which has limited e-commerce operations, struggled to stock
enough goods after an initial surge of shoppers when it reopened
many of its closed stores. The company said it has reopened more
than 4,500 stores world-wide.
The company had planned lower inventory levels to facilitate
social distancing, but sold more than expected at reopened stores
and encountered supply-chain and logistics challenges as operations
ramped up, CEO Ernie Herrman told analysts on Wednesday. He added
that the retailer has had trouble getting products in some hot
categories, such as items for the home.
TJX said traffic and sales moderated as it moved into August due
to consumer behavior and demand related to Covid-19, as well as
lighter inventories in stores than planned. Mr. Herrman said some
consumers just aren't comfortable going to bricks-and-mortar stores
for nonessential items.
Retail executives said they are unable to forecast demand
heading into the critical holiday shopping season. "There are many
potential challenges on the horizon, including uncertainties
surrounding COVID-19, economic headwinds from historically high
unemployment, uncertainty surrounding government stimulus and a
contentious November election," Target's finance chief Michael
Fiddelke said Wednesday. Predicting financial metrics "is an
exercise in imprecision at this point."
Target said it plans to lengthen the traditional back-to-school
shopping season, making school supplies available throughout the
fall. It said it thinks around two-thirds of American students are
starting the year learning online without clarity on when
in-classroom lessons will resume.
It is also planning for an extended and unpredictable holiday
shopping season, with more online shopping that past years, said
Mr. Cornell, the Target CEO. "We're certainly preparing to start
earlier than ever before in the October period," he said.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Suzanne
Kapner at Suzanne.Kapner@wsj.com
Corrections & Amplifications Lowe's Cos. reported the
strongest sales growth in decades. An earlier version of this
article incorrectly stated the company reported the strongest sales
growth in its history.
(END) Dow Jones Newswires
August 20, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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