The market went ultra-bullish last week, with promising data for Pfizer's COVID-19 vaccine candidate giving investors something to feel positive about. We've seen bank stocks find life. Airline shares have taken off. And this week is a big one for retail. Several big names are reporting earnings, and the results will factor in to how retail finds momentum.
COVID-19 really hit apparel retailers hard. Kohl's (KSS 1.83%) was no exception. Whereas grocers remained open, Kohl's stores were largely shut down, causing revenue to collapse a whopping 31.5% through the first six months of fiscal 2020 to $5.84 billion. Kohl's did reopen its stores in the second quarter, which obviously bodes well for a better third quarter.
Analysts expect the retailer to report a quarterly loss, but it seems more likely that investors will be focused on sales. Names like Amazon saw a pretty nice boost from shoppers shifting even more to online avenues for purchases. Will companies like Kohl's be able to regain what they lost earlier this year? Or did 2020 basically expedite the rate at which brick and mortar gets slaughtered? Ongoing social distancing efforts throughout the U.S. will make it hard to gauge the dynamics here. With COVID-19 ramping up going into winter, this probably isn't a time to make a play on Kohl's either way.
Kohl's reports on Nov. 17; Zacks estimates are calling for a net loss of $0.48 per share.
Target (TGT -1.29%) has been knocking it out of the park. Revenue increased by 18.1% to $42.59 billion through the first six months of fiscal 2020. Among retailers, Target is blending e-commerce and brick and mortar as well as one possibly can. Same-day services (including in-store pickup and curbside pickup) grew by a whopping 273% in the second quarter. These services complement Target's large store network.
Second-quarter net earnings jumped 80.3% to $1.69 billion, as the company achieved its best comparable sales growth ever reported in a quarter.
The big question is whether or not the pandemic continued to shift market share toward big names like Target. Digital comp sales increased 195% in the second quarter, driving 13.4 percentage points of comp sales growth. Did lessening of social distancing through the third quarter cause that trend to slow down? It's unlikely that the company will report as much growth as in the second quarter, when consumers were buoyed by a stimulus check. Target still seems likely to deliver big comp sales and market share gains, though.
Target reports on Nov. 18; Zacks estimates are calling for earnings of $1.58 per share.
Macy's (M 2.14%) needs a win, plain and simple. We watched Sears go bankrupt, and then J.C. Penney. Arguably a notch above both, Macy's has fought hard to maintain its position, but things are still stacked against the company. That fight has basically resulted in stagnation. Total revenue has hovered below $26 billion for the last four years. Prior to the COVID-19 outbreak, the company remained profitable, but things are getting tighter. Excluding asset sale gains and special items, operating income declined by more than 20% last fiscal year.
Obviously, 2020 has not pushed things in the right direction. Comp sales declined 34.7% in the fiscal second quarter, which ended on Aug. 1, and Macy's posted an adjusted net loss of $251 million.
Full-year estimates are calling for a loss of around $3.63 per share. While most of that estimated loss has already been incurred, it is not clear that Macy's is going to regain the ground that brick-and-mortar retail has yielded to e-commerce throughout the pandemic. Macy's is still heavily dependent on malls and physical store sales. While it's true that the retailer always has its biggest season during the holidays, it is not a sure thing that shoppers are going to flock back to Macy's. The retailer had been on the wrong end of the digital retail shifts prior to the pandemic. 2020 has only made that worse.
Macy's reports on Nov. 19; Zacks estimates are calling for losses of $0.81 per share.
The market has risen due to growing hopes for a COVID-19 vaccine. When investing in stocks, it's still important to be mindful of earnings. In the end, that's what drives stock prices.