With the coronavirus pandemic wreaking havoc on markets and economies, the largest retailers in the United States are struggling. This week, investors will have a chance to see how badly sales have been damaged when they report their latest quarterly earnings.
Markets were given a broader picture of consumer spending on the COVID-19 outbreak so far on Friday, when the US Department of Commerce released its monthly report. According to the figures, sales at retailers and restaurants decreased by 16.4% from the previous month, the worst measurement since data was available for this statistic, which dates back to 1992.
Amid the bleak economic outlook, investors will seek relative strength from retailers, especially those gaining market share in supermarket sales. Other factors that could determine which outlets will survive or fail include cash flow strength and debt levels. For retailers that were already on the brink, the ability to pay off debt now will be critical. Here are three names that we pay close attention to:
1. Home Depot
Home Depot Inc (NYSE 🙂 will report its first quarter 2020 earnings on Tuesday May 19 report before the market opens. Analysts expect expected earnings per share of $ 2.27 on revenues of $ 27.58 billion.
The home improvement chain faces a series of challenges in the current fiscal year, as consumers face one of the worst in modern history, a guaranteed catalyst for lower spending.
Sales could have experienced a serious downturn after activities in the Atlanta-based retailer's physical stores were disrupted by pandemic blockades, including shorter opening hours during the critical spring season. That situation may lead to the current forecast of Home Depot being scrapped, with sales of comparable stores expanding by about 4%.
That said, HD is one of those retailers in a stronger position to weather this storm than many of its weaker peers. Just before the deadly pandemic, HD was rewarded for its $ 11 billion spend to modernize stores, upgrade digital options, and improve the offering for its major trading customers.
Armed with these upgrades, chances are high that sales will be in the same store after the HD crisis.
The strength of the US housing market should also help Home Depot thrive once the COVID-19 outbreak is contained, as lower borrowing costs drive home sales, making it easier for homeowners to increase renovations spending. The stock traded at $ 239.33 and already gained 10% this year, outperforming 11% in the same period.
2. Walmart
Walmart (NYSE :), America's largest retailer, will also report first-quarter earnings on Tuesday before the market opens. Consensus expects earnings per share of $ 1.13 on revenue of $ 131 billion.
With anxious customers hoarding staples and food, and non-essential retailers closed during coronavirus locks, Walmart's great physical presence has probably helped the retailer further expand its customer base and appeal.
Huge investment in e-commerce, healthcare and the 1.5 million strong workforce is a unique winning combination that has positioned the mega retailer to supply large parts of the nation as governments and other companies struggle with how to respond to the unprecedented health and economic threat.
With expectations that the Bentonville AR-based retailer will report strong quarterly earnings and soaring online sales, investors have increased WMT share this year by 6%. On Friday, the stock closed 2% at $ 125.94.
Similar sales and Walmart's online expansion are likely to be investors.
3. Macy & # 39; s
After announcing that it would postpone the final release of the first quarter of 2020 to July 1 due to the disruptions to the Coronavirus, is Macy & # 39; s (NYSE :), the troubled department store chain with presence in 43 states and Puerto Rico, which will report preliminary Q1 earnings during pre-market hours on Thursday, May 21.
Most of Macy's workforce has been laid off since early April as it struggles to retain money after the closure of all 775 physical stores due to the pandemic.
The New York City-based chain struggled before the virus hit, as CEO Jeffrey Gennette's reversal plan failed to kick off sales. Investors will want to know if the company has a financial cushion to survive a potentially long and painful recession.
A Bloomberg report said last month that Macy's was exploring ways to use her real estate to secure fresh money and drive out the coronavirus pandemic. The department store would issue new bonds backed by certain properties and other assets to boost liquidity, the report said.
Macy's shares, which closed at $ 5.31 on Friday, have fallen by about 70% this year.
