Virus-induced spending spurs sales at Home Depot, Walmart

NEW YORK (AP) — Americans turned to Walmart and Home Depot for supplies and do-it-yourself projects as they stayed close to home at a time when new cases of virus surged, resulting in soaring sales for their fiscal second quarter.

Walmart’s online sales nearly doubled in the fiscal second quarter, helped by an expansion of its online delivery services. Sales at United States (US) locations opened at least a year jumped 9.3 per cent, the company reported on Tuesday.

With customers not going out to eat as much, they’re cooking at home, spurring sales of groceries. They’re also buying items to set up their home office or improve their outdoor area, said the store executives.

Home Depot, the nation’s largest home improvement chain, reported on Tuesday a 23.4 per cent increase in sales at stores opened at least a year globally, helped by a frenzied pace of do-it-yourself projects. That’s almost twice the 12.2 per cent increase that industry analysts had projected.

However, department store chain Kohl’s reported an adjusted loss that was smaller than expected and revenue fell 23 per cent during the fiscal second quarter. The results came as Kohl’s worked to reopen its 1,100 stores after temporarily closing them all during the start of the pandemic.

“Some parts of retailing are thriving; some parts are being devastated,” said Managing Director of GlobalData Retail Neil Saunders. “It’s demonstrating a dramatic shift of how and where shoppers are spending their money. People’s lives are revolving around the home.

That means food, home improvement and comfortable clothes.”

A woman pulls groceries from a cart to her vehicle outside of a Walmart store. PHOTO: AP

Consumers had already begun to rely on Walmart, Home Depot and other essential retailers like Target and Amazon as lifelines for necessities during the start of the pandemic. Walmart’s online sales, for example, rose 74 per cent for the fiscal first quarter. That trend accelerated to 97 per cent in the second quarter and broadened the gap between traditional retailers, many of them anchor stores at the mall, and big box operators like Walmart and Target.

Kohl’s CEO Michelle Gass told reporters on a call on Tuesday that the chain, based in Menomonee, Wisconsin, should benefit from mostly being located at strip centres. It’s also looking to capture market share from rivals that are closing stores. She also said that its home furnishings are resonating even more as shoppers are focussing on their home.

During the second quarter, online sales soared 58 per cent. And roughly 50 per cent of its online business was fulfilled in stores.

“We will be a beneficiary of consumers adopting more casual lifestyles and shopping more digitally,” Gass told analysts.

With unemployment in the US hitting frighteningly high levels, Walmart’s ability to deliver low-priced food, clothing and electronics strengthened its structural advantages further.

Home Depot and Walmart are setting a high bar for the rest of the retailers and are among the few bright spots in an industry mostly battered by the financial fallout of the pandemic.

Net income for Walmart Inc, based in Bentonville, Arkansas, reached USD6.48 billion in the quarter, or USD2.27 per share.

Earnings, adjusted for one-time gains and costs, were USD1.56 per share, easily outpacing Wall Street projections of USD1.22, according to a survey by Zacks Investment Research.

The world’s largest retailer posted revenue of USD137.74 billion, also exceeding expectations.

Home Depot Inc, based in Atlanta, earned USD4.33 billion, or USD4.02 per share, in the quarter, which was also far stronger than the per-share projections of USD3.70 from analysts. A year earlier it earned USD3.48 billion, or USD3.17 per share.

Home Depot’s revenue hit USD38.05 billion, far exceeding the USD34.94 billion Wall Street was expecting, according to a Zacks Investment Research survey.

The company easily topped last year’s revenue of USD30.84 billion for the three months ended on August 2. However, surging sales took place as the US rolled out massive assistance plans for the millions who had lost jobs or who were furloughed.

The USD600-a-week federal unemployment check that had been sent to roughly 28 million laid-off workers is gone.

And a USD1,200 stimulus check that was sent to many Americans in April and May appears to be a thing of the past.

Negotiations in Congress on a new economic relief package have collapsed and there is no evidence of an agreement on more aid, at least in the near future.

That had been a concern for analysts trying to predict how that will influence where Americans shop. Already, Walmart is seeing the expired benefits having an impact on its business.

“As the benefits from stimulus wane towards the end of the quarter, we saw comp sales settle into a more normal range,” said CEO Doug McMillon. He told analysts on a call that another round of stimulus money is necessary for small businesses.

Also, Walmart and other retailers are facing soaring costs related to the pandemic that include mostly extra pay for workers on the front lines. Walmart said that costs related to COVID-19 hit USD1.5 billion during the fiscal second quarter, up from nearly USD900 million during the fiscal first quarter.