Written by: Denis Zinoviev
2020 is shaping up to be an unprecedented year.
Coronavirus induced lockdowns and social unrest has resulted in a wave of bankruptcies, with Yelp revealing that about 60% of closed businesses will never reopen their doors again.1 Amidst the gloom, well-capitalized big box retailers have been making great strides towards expanding their online presence, which has helped send their share prices to all-time highs.
Notable examples include:
- Amazon: Its reported Q2 profit of $5.2B, or $10.30/share, is nearly double from $5.22/share a year ago.2 The company reported sales of $88.9B, up 40% from $63.4B a year prior and well ahead of expectations. Shares of the retail giant are now up more than 63.4% YTD as of 9/24/2020.3
- Target: Its Q2 earnings per share (EPS) of $3.38 significantly outpaced the market’s expectations of $1.65.4 Its revenue grew almost 25% YoY to $23B and beat the average estimate by almost $3B, while its digital sales soared 195%. The company’s share price is now up around 20.5% YTD as of 9/24/2020.5
- Walmart: The company crushed its Q2 earnings expectations, posting earnings of $6.48B, or $2.27 EPS, up from $1.26 a year earlier.6 While same-store sales jumped 9.3%, fueled by demand for food and general goods, e-commerce sales rocketed 97% in the period. Walmart is now up 16.5% YTD as of 9/24/2020.7
- Lululemon: Despite the popular athletic retailer posting a sales decline of 51%, digital sales rose an astounding 155% and now account for over 60% of total sales.8 This is a key development in the physical retail landscape left in disarray because of COVID-19. Its share price is now up 36.2% YTD as of 9/24/2020.9
We believe large, well-capitalized companies like these may present an attractive opportunity for investors, particularly given their potential to grow market share, especially with the holiday season and gradual reopenings right around the corner. The VanEck Vectors® Retail ETF (RTH®) offers exposure to companies involved in retail, including distribution, wholesalers, online retailers and retailers of food and other staples.
1 Source: Yelp Local Economic Impact Report, September 2020.
2 Source: Market Watch: Amazon promised to spend its profit amid pandemic, but ended up with record earnings anyway, August 1, 2020.
3 Source: Morningstar, September 24, 2020.
4 Source: Nasdaq: Why Target Stock Is Still a Buy After Its Post - Earnings Rally, September 1, 2020.
5 Source: Morningstar, September 24, 2020.
6 Source: Barron’s: Walmart Crushed Earnings Expectations. Why Its Stock Is Falling. August 18, 2020.
7 Source: Morningstar, September 24, 2020.
8 Source: The Motley Fool: After 20% Drop, Lululemon Athletica to Start Buying Back Its Stock Again, September 23, 2020.
9 Source: Morningstar, September 24, 2020.