As the coronavirus pandemic continues, virus-aware consumers are staying with their favorite retailers as they consolidate their shopping trips. This trend benefits some of the largest US retailers who are weathering the general economic downturn.
This week, investors will delve deeper into their financial performance as some of the largest US retailers release their second quarter earnings reports.
Home Depot: Store Modernizations, Upgraded Digital Options ]
Home Depot (NYSE 🙂 is expected to report second quarter 2020 earnings on Tuesday, August 18 before the market opens. Analysts expect earnings per share of $ 3.6 on sales of $ 34.08 billion.
Home improvement companies have outperformed the wider market this year as Americans have put extra money into improving their living environment while providing shelter. Shares of the Atlanta-based retailer are up about 30% this year, compared to gains of just over 4% for the broader one. The stock closed at $ 280.55 on Friday after hitting an all-time high earlier this week.
These positive growth trends lagged in May, as sales rose more than expected and customers spent an average of 11% more in HD stores than in the same period a year earlier.
Analysts expect this trend to continue as an increasing number of people leave major cities and move to the suburbs, a way to escape the crowds that are exacerbating the COVID-19 crisis.
Just before the deadly pandemic struck, Home Depot reaped the benefits of its $ 11 billion spending to modernize the company's stores, upgrade digital options, and improve offerings for its key retail customers. Sales of Home Depot's digital platforms grew by about 80% in the first quarter, as customers chose online shopping over in-person browsing during the pandemic.
Likewise, the strength of the US housing market should also help Home Depot flourish once the COVID-19 outbreak is under control, as lower borrowing costs drive home sales, making it easier for homeowners to spend more on renovations.
Walmart: Expanding Customer Base
America & # 39; s largest retailer, Walmart (NYSE :), will also report second quarter earnings on Tuesday, August 18 . Consensus expects earnings per share of $ 1.25 on sales of $ 135.29 billion.
At a time when people usually stay at home and consume more mundane, everyday staples, Walmart's large physical presence has likely helped the Bentonville, Arkansas-based store further expand its customer base and appeal. Significant investments in e-commerce, steps to grow healthcare and some additional benefits for its 1.5 million employees form a winning combination that has positioned the mega retailer to deliver large chunks to the nation as governments and other businesses grapple with how to respond to the unprecedented health and economic threat.
With the expectation that the retail giant will report and grow online sales, investors have risen WMT shares by 12% this year. The stock closed down 0.6% on Friday at $ 132.60.
As the coronavirus pandemic forces more consumers to switch to online shopping, media reports indicate that the retailer would soon launch a membership service called Walmart +, which would compete with Amazon's (NASDAQ 🙂 Prime . The ongoing public health crisis offers Walmart an opportunity to entice and possibly retain the growing number of online shoppers through a membership program with fast delivery and other benefits.
According to Bloomberg, citing a survey by Credit Suisse analysts and researcher Numerator, five million customers were able to join Walmart + from the start. The potential audience for the service could be as high as 20 million, the report said. Amazon & # 39; s Prime program, on the other hand, has more than 118 million members in the US, according to Consumer Intelligence Research Partners.
Bottom Line
show improvements in their sales, their profitability may be hit by the costs associated with higher wages and benefits, together protecting customers during the coronavirus pandemic. That said, comparable sales and any vendor's online expansion will be the two critical metrics that investors should focus on.