Walmart Beats Estimates as Online Sales Nearly Double

Walmart Inc. posted its largest-ever growth in online sales on August 18 as shoppers cashed in stimulus cheques and ordered everything from electronics and toys to groceries from the safety of their homes amid the COVID-19 pandemic. The near-doubling of online sales in the second quarter helped the retailer trounce Wall Street expectations for quarterly profit and same-store sales.

The results showed that the unprecedented spike in demand seen by big-box retailers at the peak of the coronavirus lockdowns has remained strong even as restrictions ease, with shoppers using their stimulus cheques to shop for discretionary items such as sneakers and clothes. This also helped Walmart reduce the number of markdowns or discounts.

However, as stimulus funds tapered off, sales at Walmart returned to normal, recording only a 4% rise in comparable sales in July. Shares were trading down marginally at US$134.80 after hitting a record high in morning trading.

“The health crisis has created … both tailwinds and headwinds to our business,” said chief financial officer Brett Biggs on a call with investors. “In Q2, we saw stronger-than-expected sales due in large part to stock-up buying and stimulus spending, but the duration and extent of future government stimulus remains uncertain.”

Back-to-School Woes

Walmart executives also said the back-to-school season has been “choppy,” as more school districts rolled back their reopening plans to curb the spread of coronavirus and shoppers had little-to-no need for backpacks and uniforms. “Hinting at back-to-school being a little bit weaker or more spread out – and with no guidance – always gives investors an area of concern,” said Randy Hare, portfolio manager at Huntington Private Bank, adding that shares might have traded higher had they done so.

Despite recording US$1.5-billion in COVID-19 related expenses, which include higher wages and bonuses for employees, Walmart said its margins improved in the quarter, helped by stimulus cheques that had consumers spending on bigger ticket items such as home furnishings and apparel. Walmart’s online and grocery businesses have been bright spots, seeing rapid growth as it expands same-day delivery options and pick-up services.

Its U.S. online sales rose 97% in the quarter. Sales at U.S. stores open at least a year rose 9.3%, excluding fuel, in the quarter ended July 31. Operating income rose 8.5% to US$6.1-billion in the quarter, while adjusted earnings per share of US$1.56 also topped the average estimate of US$1.25.

Walmart Plus, or Walmart+, a new subscription service, touted as a rival to Inc.’s Prime subscription, could upon its launch also be a way to attract new customers and turn them into loyal shoppers, analysts said. Executives \said it was still working toward the launch of the service.

Source: Globe and Mail
Source: Financial Post

Home Depot Sees Record Sales Surge as Pandemic Leads to More DIY Projects

Home Depot logo

Home Depot Inc. reported its biggest rise in quarterly same-store sales in at least two decades on August 18 as demand for paint, tools and lawn mowers surged from consumers stuck at home because of the COVID-19 pandemic. The company’s same-store sales jumped 23.4% in the second quarter, surging past analysts’ average estimate of a 10.5% rise, as the home improvement chain emerged as one of the corporate winners during the pandemic.

Shares of Home Depot, however, fell about 1% in morning trading after analysts cautioned that its sales might have hit their peak. “These are record comparable sales – it’s really tough to sustain that,” Wedbush Securities analyst Seth Basham said. “We will see a slowdown in the back half of the year – the question is the degree to which the slowdown occurs.”

The company said it could not determine whether strong demand from earlier months would continue for the rest of the year, despite the U.S. housing market performing better than the broader economy. People spending more time on do-it-yourself home projects such as painting and gardening pushed Home Depot’s overall sales up 23.4 % to a record US$38.05-billion in the quarter ended Aug. 2. 

That resulted in the company’s highest ever profit sharing payout to its hourly employees. The company spent about US$480-million in additional benefits, including weekly bonuses and overtime, to compensate workers required to work in stores and warehouses amid the health crisis.

Still, net income rose 24.5% to US$4.33 billion, or US$4.02 a share. Analysts had expected a profit of IS$3.71 a share, according to IBES data from Refinitiv. Shares of smaller rival Lowe’s Cos. Inc., which reports second-quarter results on August 19, were down marginally.

Source: Globe and Mail

Lowe’s Blows Past Sales Estimates as Home-Improvement Spending Surges

Lowe’s Cos. reported a strong summer sales pace that beat estimates as housebound Americans in every region did more home improvement while cutting back on other discretionary spending. Same-store sales in the U.S. rose 35.1%, beating the estimate for a 20.5% gain from Consensus Metrix. Lowe’s adjusted earnings per share for the second quarter ended July 31 of US$3.75 also beat the average analyst estimate.

Lowe’s Chief Executive Officer Marvin Ellison said all U.S. geographic areas delivered comparable sales growth of at least 30%, meaning sales grew in even the hardest-hit virus regions as Americans looked for do-it-yourself projects. The momentum has continued into August, with comparable sales so far on par with July’s 28% growth, even as stimulus checks to Americans stopped flowing last month. Shares rose as much as 3.2% in New York. They had risen 32% year to date through August 18 and have been trading at record highs.

Lowe’s, like rival retailer Home Depot Inc., has benefited as consumers invest in their homes, where many have been stuck for months, resulting in more wear and tear. Home-improvement retailers, seen as a proxy for the U.S. housing market, also do better when the housing market is strong. U.S. home construction starts increased in July by more than forecast, surging by the most since 2016, according to data released on August 18.

Lowe’s has been expanding in digital as wary customers prefer to stay home, with sales on its website soaring 135% in the quarter. Faster delivery has been a priority for the company, which said it plans to build up its supply chain in order to provide more same-day and next-day service offerings and boost its shipping capabilities over the next 18 months.

In urban markets, Lowe’s saw “strong sales trends,” and comparable sales outperformed more rural areas. Its pro business, which includes sales to trade professionals, saw same-store sales growth in the mid-20s, Ellison said.

During the second quarter, Lowe’s invested $460 million in support of frontline hourly associates, communities and store safety. Lowe’s reported higher selling, general and administrative expenses — up 18% — plus US$10 million of pretax operating costs related to its previously announced store closings in Canada.

Source: Globe and Mail
Source: Bloomberg
Source: Cision News Wire