The retail apocalypse was well underway before the COVID-19 pandemic changed the world. It's difficult to say, however, that the outbreak hasn't exacerbated an already tough situation. Neiman Marcus, J.C. Penney, GNC, True Religion, and J. Crew are just some of the names forced into bankruptcy since March, when the impact of COVID-19-related closures became overwhelming. More bankruptcy filings are expected.
It wouldn't be accurate to say every single brick-and-mortar name is in trouble, though. Some are holding up under the tough conditions, while others actually seem to be thriving in this environment. Here's a rundown of four retailers investors may want to consider simply because they're proving immune to the retail fallout.
Walmart does it all, all the time
No surprises here: Walmart (NYSE:WMT) has become something of a lifeline since COVID-19 took hold. Not only does it sell groceries and cleaning supplies that consumers desperately need, but it can bring those items to customers' cars with curbside pickup. As fellow Fool Adam Levy recently explained of a Gordon Haskett survey taken shortly after the coronavirus outbreak got going, Walmart was the retailer of choice for more than half the consumers who were just starting to use the online ordering option. That user growth drove a 74% year-over-year improvement in e-commerce revenue for the company's first quarter, supporting the 10% same-store sales increase for U.S. locations.
The COVID-19 sales growth surge won't last, of course. The pandemic will eventually abate, but the current conditions have accelerated changes that the world's biggest retailer was already putting in place. The deeper dive into healthcare, a greater willingness to handle its own logistics headaches, and the understanding that it has to cater to consumers' lifestyles -- rather than simply exist -- have all become part of CEO Doug McMillon's repertoire.
Dollar General is the un-Walmart, and it works
Dollar General (NYSE:DG) is everything that Walmart isn't. But that's the point: being the un-Walmart has its place in the current consumerism landscape, too.
Chief among these differences is where the company chooses to locate. While Walmart prefers fewer but bigger superstores near the center of densely populated areas, Dollar General has been and continues to establish its presence with smaller stores located off the beaten path. About three-fourths of its locations are found in towns with a population of less than 20,000 people, yet CEO Todd Vasos explained during March's earnings call that 75% of the country's residents live within seven miles of a Dollar General store. The company further reports that its smaller footprint means the average shopper can be in and out of a Dollar General in less than 10 minutes. That sort of speed would be a miracle at a typical Walmart.
The formula seems to work. Revenue last year was up 8.3%, and in the fiscal 2020 first quarter, same-store sales growth surged to 21.7%. The company isn't just growing, because it's setting up shop in the right places, though. The addition of fresh produce, for instance, is made possible by the purchase of more of its own trucks, which can handle the necessarily speedy deliveries of such goods, among others. It's the exact solution a large swath of consumers need at the moment.
Nordstrom delivers an incredible in-store experience
Nope, that's not a misprint. Despite some pretty tremendous woes for rival department store chains like Macy's, Nordstrom (NYSE:JWN) is actually well positioned to survive the retail apocalypse. There's just a major footnote that goes along with its entry within this list. That footnote? Nordstrom is still struggling. It's just going to win by attrition, or with fewer competitors once the COVID-19 pandemic is finally licked.
For perspective, the company's numbers for its fiscal first quarter ending in early May were about as rough as one might expect. Sales were down nearly 40% year over year, pulling the retailer into the red to the tune of $521 million. The quarter currently underway isn't expected to be exceptionally better.
However, Nordstrom has approached things differently than other department store chains. For example, consider its inventory management. Aside from a healthy dose of private-label sales, Nordstrom has a strong mechanism for canceling, postponing, and clearing out goods it no longer wants. As of the end of the first quarter, inventory levels expressed as a percentage of revenue didn't balloon from their pre-coronavirus norm, despite the sharp plunge in sales. Meanwhile, other retailers are swimming in merchandise that's already past its marketable shelf life. A massive number of Nordstrom Rack outlet stores are one of the keys to this inventory flexibility, but last quarter's ability to steer clear of unneeded merchandise also points to an incredibly nimble supply chain.
The other edge Nordstrom has on competing department stores is a clear understanding that amenities are a requisite and not just a nicety. Restaurants, collaborations with designers, and dry-cleaning services are just some of the lifestyle-oriented offerings this company leverages to connect with its customers.
Home Depot get serious about omnichannel
Finally, Home Depot (NYSE:HD) is one of the big names that's remained unfazed by the tides of consumer change that have proven so problematic for other brick-and-mortar outfits. The hardware store chain's comparable sales for the quarter ended in early May were up 6.4% year over year despite the obvious headwinds. While per-share profits fell from $2.28 to $2.07, that hit was the result of unexpected spending linked to the pandemic. Gross profits on merchandise sold was up almost as much as the top line, extending a long-standing streak of sales growth.
This consistent progress is made possible by the nature of Home Depot's revenue mix. It may not be completely accurate to say Home Depot is recession proof, but it sells everything ranging from home repair supplies to remodeling solutions to new construction materials. That's in addition to basic consumables like light bulbs and batteries, which are sought by consumers regardless of the economic environment, many of whom can't wait for such goods to be delivered.
Home Depot isn't attractive just because it's a solid all-weather retailer, though. It's also smartly adapting to the new norm in retailing. It has offered online shopping for years, for the record. But the company has only recently begun truly exploring the potential in this channel, and it's working. Recent investments in fulfillment, its online shopping app, and even in search translated into more than 20% growth in online sales for the final quarter of 2019. As lockdown orders spread across the country, online growth jumped to 80% in the fiscal first quarter. Better yet, more than half of Home Depot's online customers picked up their purchases in a store, and many of them made an additional purchase while there.
Home Depot may well be the perfect omnichannel machine that doesn't have to fear purely web-based competition.