The S&P 500 peaked at record highs on Tuesday, last seen before the start of the coronavirus crisis in February, and rallied on gains in thriving shares of Amazon, as a number of large retailers sold increased sales despite the pandemic.
However, doubts about the underlying health of the economy were raised sharply in response to bumper results from Home Depot and Walmart, whose shares fell on warnings that retail may have caught on if stimulus cash runs dry.
Walmart’s online sales nearly doubled in the fiscal second quarter, helped by an expansion of its online delivery services.
Sales at U.S. locations, open at least a year, jumped 9.3 percent, the company reported Tuesday. With customers not eating as much, they cook at home and encourage the sale of groceries. They also buy items to set up their home office or improve their outdoor area, store managers said.
Customers wearing face masks at a Walmart on July 16 in Pembroke Pines, Florida. Walmart’s online sales nearly doubled in the fiscal second quarter
Home Depot earned $ 4.33 billion for the quarter on a turnover of $ 38.05 billion, both of which also beat expectations
A five-year view of the S&P 500 shows the index fully recovering from March losses
Home Depot, the nation’s largest home improvement chain, reported on Tuesday a 23.4 percent increase in sales at stores that opened worldwide for at least a year, helped by a frenzied pace of do-it-yourself projects. That’s nearly twice the 12.2 percent increase projected by industry analysts.
However, Kohls reported an adjusted loss that was smaller than expected and revenue fell 23 percent during the fiscal second quarter. The results came as Kohl’s worked to reopen its 1,100 stores after temporarily closing them all at the start of the pandemic.
‘Some parts of retail are booming; some parts are destroyed, ‘said Neil Saunders, managing director of GlobalData Retail. ‘It demonstrates a dramatic shift in how and where customers spend their money. People’s lives revolve around the house. That means food, home improvement and comfortable clothing. ‘
Consumers were already beginning to rely on Walmart, Home Depot and other essential retailers such as Target and Amazon as lifelines for necessities during the onset of the pandemic.
Walmart’s online sales, for example, rose 74 percent for the fiscal first quarter. That trend accelerated to 97 percent in the second quarter and widened the gap between traditional retailers, many of their anchor stores at the mall, and major retailers such as Walmart and Target.
Kohl’s CEO Michelle Gass told reporters on a call Wednesday that the chain, based in Menomonee, Wisconsin, should benefit from being found most at strip centers.
It is also looking to sell rivals closing. She also says that the home furniture reviews even more as buyers focus on her home. In the second quarter, 50 percent of online sales were completed in stores.
“We will benefit consumers who adopt more casual lifestyles and shop digitally,” Gass analysts said in a call.
As unemployment in the US hit alarmingly high levels, Walmart strengthened its ability to provide low-cost food, clothing and electronics, furthering its structural benefits.
Home Depot and Walmart set a high bar for the rest of the retailers and are one of the few bright spots in a sector most affected by the pandemic’s financial fallout.
Target, Lowe’s, TJ Maxx and Marshalls parent, and Victoria’s Secret parent are scheduled to report their earnings on Wednesday.
Surging of sales at Walmart and Home Depot took place when the US ran out of massive aid plans for the millions who had lost jobs or who had fallen into disrepair.
The $ 600-a-week federal unemployment check that was sent to some 28 million laid-off workers is gone. And a $ 1,200 incentive check sent to many Americans in April and May seems to be a thing of the past.
Buyers wearing protective masks walk through a Home Depot in New York on Sunday
Negotiations in Congress over a new economic relief package have collapsed and there is no evidence of an agreement on more aid, at least in the very near future.
That would have been a concern for analysts trying to predict how that will affect where Americans shop. Though Walmart sees the past benefits affecting its business.
“Because the benefits of incentives declined towards the end of the quarter, we saw that comp sales regulate into a more normal range,” said CEO Doug McMillon. He told analysts on a call that another round of stimulating money is needed for small businesses.
Sales at Walmart returned to normal as stimulus tapped, recording only a 4 percent increase in similar sales in July. Shares fell marginally to $ 134.80 after hitting a record high in morning trading.
Also, Walmart and other retailers have to deal with increased costs associated with the pandemic which mostly includes extra wages for frontline workers.
Walmart said costs related to COVID-19 hit $ 1.5 billion during the fiscal second quarter, up from nearly $ 900 million during the fiscal first quarter.
Net revenue for Walmart reached $ 6.48 billion in the quarter, and revenue hit $ 137.74 billion, both above expectations.
Home Depot earned $ 4.33 billion for the quarter on a turnover of $ 38.05 billion, both of which also beat expectations.
A shopper wearing a protective mask leaves a Walmart store in Lakewood, California in July
Administrators, however, warned that the future as a retail sector remains dim, with so much remaining unknown about how the pandemic will unfold and whether Congress can reach a deal on new relief.
“The health crisis has created … both tailwinds and headwinds for our business,” Walmart CFO Brett Biggs said in an interview with investors. ‘In Q2, we saw stronger-than-expected outlets that were largely due to purchases and stimulus spending, but the duration and extent of future government stimulus remains uncertain. “
Walmart executives also said the back-to-school season has been ‘choppy’ as more school districts roll back their reopening plans to curb the spread of coronavirus and shoppers did not need much for backpacks and uniforms.
“To indicate that back-to-school is a little weaker than more widespread – and without guidance – always gives investors an area of concern,” said Randy Hare, portfolio manager at Huntington Private Bank, adding that stocks may have higher had they done so.
Walmart Plus, or Walmart +, which emerged as a rival to Amazon.com’s Prime subscription, could also be a way to attract new customers and turn them into loyal shoppers at launch, analysts said.
Drivers on Tuesday said it was still working on launching the service.
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