Big-Box Retailers Post Strong Sales, Profits Amidst Pandemic
On Wednesday, Target reported the greatest percentage increase in quarterly sales in the company’s history. Walmart, which reported earnings on Tuesday, doubled its e-commerce sales. Home Depot’s sales increased more than 23 percent in this year’s second quarter. Lowe's announced that its second quarter sales surged 30 percent, boosted by a 135 percent increase in e-commerce sales. Wayfair reported earlier that its revenue was up roughly 80 percent year-over-year.
While the COVID-19 pandemic has been devastating for the broader retail industry, resulting in store closures and a record pace for bankruptcy filings, several big-box retailers reaped the benefits of less competition in the market (i.e., non-essential stores were shuttered for part of the quarter). Furthermore, their success can also be attributed to a one-stop shopping advantage — both in person and online. Big-box retailers such as Walmart and Target allow for budget-conscious shoppers to pick up groceries, clothing, electronics, and home goods at the same time.
Total Retail's Take: There are likely a couple of different reasons why we're seeing big-box retailers prosper while their smaller industry counterparts try to hang on for survival. First, these retailers were deemed essential by state governments, and therefore allowed to remain open throughout the pandemic. One can argue whether that was fair, but it certainly contributed to record earnings in many cases for "essential" retailers. Second, these big-box retailers had the resources and infrastructure in place to evolve their operations quickly to better serve online shoppers through services such as same-day delivery; curbside pickup; buy online, pick up in-store (BOPIS); and ship from store. The local grocer or hardware shop on Main Street didn't have that ability. Lastly, consumer spending in the quarter was bolstered by government stimulus checks and a $600 weekly increase to unemployment benefits. With those benefits going away, it will be interesting to see if the big-box retailers can continue the momentum in Q3. Furthermore, with non-essential retail stores allowed to reopen, there's increased competition in the market. But for now, Target, Walmart and other industry titans continue to get stronger.