It’s a major week for retail earnings.
Walmart, Target, Macy’s, TJX Companies, Kohl’s, Ross, and Tapestry Inc. all report earnings for the second quarter this week. Shipping delays, the impact of the Delta variant, and the back-to-school and holiday season are likely to be top of mind in the reports.
Thus far, this retail earnings season has been marked by recovery trends and a general return to pre-pandemic sales levels. And while certain elements such as the rise in e-commerce and direct-to-consumer sales appear to be here to stay, many companies are reporting a return to pre-pandemic activity.
In June, consumer worry was down for the first time since the peak of the COVID-19 pandemic, according to First Insight’s consumer survey. Consumer worry dropped to 59% compared to 87% in April 2020.
In July, retail sales were $617.7 billion, marking a decline of 1.1% since June but a 15.8% increase from July 2020.
This month, David Simon, the chairman, president and CEO of Simon Property Group, reported that sales at the firm’s malls across the country are returning to pre-pandemic levels. Simon said that despite naysaying, “physical retail is here to stay.”
As more retailers report this week, here are the trends to watch out for.
The impact of the Delta variant
The Delta variant’s impact on foot traffic and company life will likely be an important factor in upcoming earnings reports this week.
The recent uptick in cases with the COVID-19 variant has already caused some retail companies to consider new policies in their stores and offices. Some have revisited their mask policies and recommendations for customers and employees. Target now requires its employees to wear masks and recommends that customer wear them. Walmart recommends customers wear them as well.
At the same time, some employers are strongly encouraging or requiring their employees to get vaccinated in order to return to the office. TJX Companies Inc., the parent company of Marshalls and TJ Maxx, Under Armour, and Walmart were among the first retailers to require all US employees to be fully vaccinated to return to the office.
Port congestion and shipping disruptions have been a major topic for brands and retailers this earnings season. Freight rates have reached record highs amid pandemic-related shipping slowdowns, factory and store shutdowns, clogged ports and worker shortages.
Retailers like Deckers and VF Corp. have been forced to seek out alternate solutions to move product, sometimes at a much higher price point via air freight.
According to a monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates, imports at the country’s largest retail container ports will hit record-highs in August.
With back-to-school and preparation for the holiday shopping season around the corner, retailers this week will likely have to answer to analyst questions regarding shipping strategy for the upcoming months.
Back-to-school and the holiday season
Back-to-school spending is expected to reach $37.1 billion, compared with $33.9 billion last year, the National Retail Federation and Prosper Insights & Analytics said last month. Spending will increase of 7.5% year over year per child, the survey said.
According to a report from foot traffic analytics company Placer.ai, Walmart and Target are both positioned to do well in the back-to-school season. Both retailers saw foot traffic increases in stores in July 2021 compared to July 2019, according to the report.
When it comes to the holiday season, more people are planning to buy in person for the holidays — and sooner. According to a survey from Shopkick, 22% of consumers plan to shop well ahead of the winter holidays, with many feeling comfortable going to shop in stores. Stores with unique gift offerings and experiences are likely to benefit from this trend.