With the second quarter 2020 earnings season behind us, investors no longer doubt that chain stores and tech giants are the biggest beneficiaries as the pandemic increased demand for their products and services.
This week's earnings reports from some of the largest retail chains showed strong sales gains as consumers increased spending on everything from food to home refurbishing products.
Target (NYSE 🙂 yesterday reported the strongest in its history, boosted by online sales. Target's comparable sales – that of stores and digital channels with a minimum of 12 months of operation – increased 24% in the quarter ended August 1, a record for the company and twice that of the May quarter. Profits were broad-based across such categories as food, electronics and household goods, as people were usually locked in their homes.
Target chart for 1 year.
Like Target, Walmart (NYSE 🙂 also showed similar trends, comparable store sales that surpassed analyst estimates with a 9.3% increase in its US stores. The US retailer's e-commerce sales were up 97% in the quarter, showing that the company is hard at work expanding its reach and market share as more people buy online.
Walmart 1 Year Pass.
This impressive e-commerce performance of the brick-and-mortar stores should be of some concern to Amazon (NASDAQ :), the world's largest online retailer whose profits doubled from a year earlier from April to June. The e-commerce powerhouse has revenues and profits even after spending $ 4 billion over the period to stabilize its supply chain and improve employee safety.
Amazon 1-Year Chart.
While key retailers benefited from lockdowns and stimulus controls that boosted Americans' purchasing power for everything from groceries to bicycles, the future of this monetary stimulus remains uncertain as Democrats and Republicans again fail to negotiate a new deal .
Techbehemoths Are Getting More Powerful
Despite the grim economic outlook caused by the virus, tech giants Apple (NASDAQ :), Facebook (NASDAQ :), Alphabet (NASDAQ 🙂 and Microsoft (NASDAQ) 🙂 all reported better-than-expected financial results, each generating billions of dollars in revenue for the June quarter.
The figures produced by, and all, showed the resilience of their business models, even during a recession. These companies gained ground as increasing online shopping, interacting with social media, and tapping teleworkers in the cloud reinforced their lead.
Facebook Year In Review.
Yesterday, Apple became the first company to have a market capitalization of $ 2 trillion, as stocks continued their upward movement, shooting 60% this year. Apple stock closed at $ 462.83 yesterday.
Apple 1-Year Graph.
By contrast, for companies with an old economy, it was all about surviving and preserving cash. From industrial giants like Boeing (NYSE 🙂 and Caterpillar (NYSE 🙂 to airlines and oil producers, executives were convinced that customers may not be returning to the pre-pandemic level of travel and socializing too soon.
Boeing has announced additional layoffs and new production cuts for all of its major commercial jet programs, including the still-grounded 737 MAX, which it now expects to return to the air in the fourth quarter as people keep avoiding travel
Boeing 1 Year Pass.
At Caterpillar, sales of construction equipment to countries in Asia Pacific declined 10% compared to last year and 54% in North America. The price environment for the construction giant remains weak, especially in the competitive Chinese market.
Caterpillar 1 Year In Review
Energy Producers Keep Cash
Energy producers facing low prices and one of the most severe demand devastations in recent history are trying to stop this recession endured by budget cuts and, in some cases, ever holy dividends.
Exxon (NYSE 🙂 and Chevron (NYSE 🙂 released their second quarter 2020 earnings reports, which revealed the magnitude of the damage they suffered from the pandemic collapse in energy demand.
In Chevron lost $ 8.3 billion, its largest loss since about 1998. That display was also in stark contrast to the same period the previous year, when the company posted a profit of $ 4.3 billion.
Chevron 1-year chart.
Exxon had a similar disturbing story to tell. The largest US-based oil and gas producer recorded quarterly back-to-back losses for the first time this century. The energy company, based in Irving, Texas, has a deficit of $ 1.1 billion, compared to profits of $ 3.1 billion in the same period a year ago. Exxon also told investors it will delay its ambitious expansion plan to save money. The company failed to generate positive operating cash flow in the quarter.
Exxon 1-year chart.
Bottom Line
As it sets a new record in a full V-shaped recovery, the second-quarter earnings season shows that this turnaround is being led by retail and tech giants benefiting from the pandemic-driven boom in demand. For the rest of the economy, it's all about survival.
