4 min read
Retail Sales Rebound by Record Rates in May
June 19, 2020
9 min read
The record surge contributed to a trifecta of pent-up demand, warm weather, and stimulus money. In weeks, retailers have had to readjust their strategy and operations to accommodate capacity restrictions and new modes of shopping like a curbside pickup. While the increase is promising, companies preface these emerging trends with reminders that growth and sales have not returned to pre-COVID levels.
States and stores slowly reopened in May, and the impact is captured by the 17.7% increase in U.S. monthly retail sales from April to May. The growth is the most significant month-over-month change in retail sales ever.
As stores reopen and sales pick up, retailers outline the new roles of physical stores with an accelerated path towards driving digital adoption and using physical assets to improve the overall purchase experience. In addition, bankruptcies filed by major retailers such as J.Crew, Neiman Marcus, and J.C. Penny cement this as an inflection point for retailers to evolve or die.
- Retailers are accelerating digital strategy execution to help build better omnichannel experiences for consumers.
- Newmarket share is up for grabs as small to major retailers file for bankruptcy across the U.S and consumers seek out new retailers to purchase goods from.
- 3-5 years of change has been condensed into a few months, and retailers who anticipated consumer preferences and habits are getting stronger, whereas those waiting are struggling to survive.
AlphaSense can track emerging trends across the entire market, industry, or watchlist. For example, we expect reopenings and retail sales to be an essential theme to follow. Start your free trial of AlphaSense now, or log in to your account.
Ralph Lauren Corp, Evercore ISI Virtual Consumer & Retail Summit, 6/17
“I think that much like we’re going to see across the industry that you will see a wedding out of the weak and the strong. Now I think some of that will come retailer by retailer. We’ve seen. JCPenney’s new markets enter into Chapter 11. But I also think that department stores like Macy’s will focus on their stronger accounts. Their stronger doors tend to be our stronger doors. So it’s not — I don’t think that it will be a bad thing over time. It will be healthy to put them in a better position from a door positioning standpoint. I think we feel like we got out ahead of, not all of it, but a majority of it when we cleaned up our system in participation and cleaned up some sales points 2 years ago. So a lot of that has been done in our system. Not all. We didn’t have a perfect crystal ball, but we feel pretty good from where we’re positioned now.”
Dollar General, Oppenheimer Consumer Growth & E-Commerce Conference, 6/17
Q: “Okay. And Todd, as you look at the retail landscape, so clearly, many retail bankruptcies are already more likely coming. So how could the share opportunity be different coming out of this crisis versus a financial crisis in 2008, 2009?”
A: “Yes. I think it will be different, right? It will be different on a couple of fronts. You’re right; there are some unfortunate retail bankruptcies out there. There will be a lot of displaced customers looking for goods. We feel we’re well-positioned in many cases. We’ve taken advantage of a lot of those to date. Think of Fred’s and others who unfortunately went out of business over the last 12-or-so months. And we continue to watch that and continue to attract and hopefully retain those customers looking for a viable option. The one thing to keep in mind, though, that I think is important is that the consumer post-COVID is going to be looking for a place to shop close to home that you don’t have to fight the crowds and has a great value convenience cross-section. And that’s almost in the definition, if you will, if not the definition of what Dollar General is.”
HanesBrands, Evercore ISI Virtual Consumer & Retail Summit, 6/15
“Yes. Certainly, the door closures have been a headwind for us for several years from the standpoint of the transition. We had certainly focused on building our online business from consumer direct and general, more stores in certain countries, particularly internationally and online in this country, including the brick-and-mortar dot-coms and the pure plays. So it feels like — and you always say this, and you always wonder if this truly is the case, but it feels like this has been a good thing. It’s taken some of the questionable retailers and their stores, and it’s taken them out or adjusted them. So Sears was a couple of years ago, that one came off. And at a minimum, we’re going to see pennies come out of this thing with fewer doors and so forth. And as we look at the other department stores, I guess that some of these doors are never reopened. But what we also see is that the dot-com sites of those brick-and-mortar department stores are increasingly representing a large portion of their total sales for our business. So I think our focus is insulated heavily from the potential of future impact. So you never say never, but I would say that I feel that the worst of it is behind us. And if there’s a good thing to come out of this pandemic, it forced out some of the remaining bad doors and retailers that could have been a problem in the future.”
Children’s Place, Q1 2020 Earnings Call, 6/11
“Due to the pandemic, consumers all across America have been forced to shop online, many for the first time, with positive results. However, we anticipate that the lingering impact of COVID-19 will continue to accelerate the shift to digital, putting enormous pressure on the already stressed brick-and-mortar channel, resulting in accelerated store closures. Further exacerbating this issue are the forced bankruptcies of several weaker retailers that we’re unable to handle the demand shock to their balance sheets caused by the pandemic. Retail bankruptcies almost always come with outsized and accelerated store closures, or in many cases, full store liquidations. When you combine the accelerated shift to digital, which we believe will continue over the long term, with the large number of store closures anticipated to occur over the next few years, we believe that significant market share consolidation opportunities exist for retailers with stronger balance sheets, developed Omni capabilities and recession-proof assortments.”
RH, Q1 Earnings Q&A Conference Call, 6/04
“But yes. I think you’re going to see — the biggest fallout here is the — or the biggest change is the best brands, and the best kind of retail businesses will be much stronger coming out of this. And the people that we’re weak, that were on the fringe, the people that don’t have a — I was talking to an astute investor, one of the people — I think he’s one of the smartest people I know on the planet. And he said, look, people who don’t have a fully integrated multichannel business that’s frictionless for the customer will be gone by 2022. This is going to accelerate that. It’s accelerating the weak retailers. Like Neiman Marcus was always going to go bankrupt. Are they going to go bankrupt two years or three years from now, or they just went bankrupt now, right? And the weaker businesses, it just accelerates. So it’s like a cleaning house. But history would tell you, every time there’s a cleaning house, there is like newness that comes. There’s new grass that grows. There are new ideas that come to the market. There are new things that evolve. And it’s different, but it’s usually just a lot better.”
Kirkland Inc, Q1 2020 Earnings Call, 6/04
“First, we took the opportunity to rightsize the company and make it nimbler than ever. That capability was on display very early on and in the pandemic when we were one of the first in the country to stand up the contactless curbside pickup to great success. Second, we have less store-based competition. With the ongoing liquidation of Pier 1 and last week’s announcement of Tuesday Morning’s bankruptcy and the closing of 1/3 of their stores, we see a significant amount of our stores lose competition within their markets. Third, we entered the pandemic with strong trends in the stores and online, and those accelerated online while the stores were closed, and the trends have returned in both channels since the stores began reopening. Fourth, our online business is fueled by margin-friendly promotion and first-time shoppers. These four factors have positively affected our results to date in the second quarter.”
American Eagle Outfitters, Q1 2020 Earnings Call, 6/03
“Our third near-term priority is preparing for a new future. This event has accelerated the disruption that has been underway in the retail industry. Bankruptcies and some store closures will continue, which we see as an opportunity to gain share. We’ll use this event as an inflection point to charter a new and more profitable course for the company.”
Burlington Stores, Q1 2020 Earnings Call, 5/29
“There’s one other point to keep in mind when comparing our current situation with 2008, 2009; I think the pivotal moment in the financial crisis was when Lehman Brothers declared bankruptcy in 2008. After that, the economy and retail sales began to begin fall apart. The third and fourth quarters of 2008, as I recall, were very difficult for all retailers, including off-price. And the spring of 2009 wasn’t great either. It wasn’t until the back half of 2009. So a whole year later, the off-price retailers started to post very strong high single-digit, even low double-digit comp-store sales growth numbers. And from that point onwards really began to take market share. If you apply that same timing for the current situation, it takes us to late spring or even the summer of 2021. So yes, I agree. I think it’s about the comparison. I think this could turn into a big opportunity for off-price. But one of the lessons from 2008 that I think is important is it could take some time before the opportunity materializes.”
AutoZone, Q3 Earnings Call 2020, 5/26
“Then, at the beginning of the third 4-week period, federal stimulus checks began to arrive and flow through the U.S. economy. We experienced a significant change in trend, moving from negative double-digit comps to a significantly positive comp almost immediately. To put this in perspective, in 2 days, from a Monday to a Wednesday, our retail sales increased by roughly 50%, 5 0 percent in 2 days, and we continue to experience extremely robust sales performance through the end of the quarter. Throughout this crisis, our DIY business has been substantially stronger than DIFM. Retail began rebounding sooner and reacted stronger than commercial when the stimulus money arrived. Our commercial business turned positive again at the end of the quarter but had not yet returned to double-digit growth like before the crisis.“
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