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Target And Walmart Prove There's Still Some Life In Retail

Although the future of retail remains in question, its recent past shows it was at least trending in the right direction prior to the pandemic.

Benzinga · 05/21/2020 14:14

Although the future of retail remains in question, its recent past shows it was at least trending in the right direction prior to the pandemic.

On Tuesday, both Walmart, inc. (NYSE: WMT) and Target Corporation (NYSE: TGT) posted stronger-than-expected first-quarter revenue figures, although Walmart did miss bottom-line expectations whereas Target surpassed analysts' EPS target.

Walmart

Once again, Walmart showed that its business fundamentals remain strong even in a period of growing uncertainty for brick-and-mortar retailers.

This is in part thanks to a developed online storefront. During the quarter that ended in April, its online sales surged with overall revenues amounting to $134.62 billion which is an increase from $123.93 billion one year ago.

First-quarter costs also rose to around $900 million, mostly due to COVID-19 related expenses including cleaning and safety precautions, along with increased hourly and bonus pay for store and warehouse workers. Moreover, just like Amazon.com, Inc. (NASDAQ: AMZN), it is among the rare few who will increase its workforce as it plans to increase its workforce with 150,000 workers to meet the surging demand. But Walmart went the extra mile as it included workers who have lost their jobs in the pretty much dead sector that includes hotels and restaurants, giving those workers immediate positions in delivery and order fulfillment.

Target

In its earnings release, Target posted net sales of $19.6 billion, exceeding estimates of $18.75 billion. This helped boost the company's operating income to $468 and provided shareholders an adjusted diluted EPS of 59 cents versus analyst estimates of 46 cents.

However, Target did indicate some negatives in its report, including operating margins falling to 2.4% from 6.4% a year ago. The company attributes this to a combination of increased sales of lower-margin products such as food as well as investments in new safety measures and premium pay for hourly workers.

Not all retailers were that "lucky"

This is by no means the case for everyone in retail as just on Monday, besides cutting its full-year profit guidance, Home Depot, Inc. (NYSE: HD) missed Wall Street's forecasts as after pre-tax costs to counter the coronavirus pandemic reached $850 million. Even Walmart withdrew its guidance due to the uncertainty of this dynamic crisis which is creating many external variables with potential impact, the same reasons Target declined to the same.

It can be said that e-commerce came to retail's rescue -moreover it helped all those retailers which boarded that train in time to deliver their brand promise even amid these unprecedented times.

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