While there are now two COVID-19 vaccines that will likely be in mass production early next year, the stock market struggled on Tuesday as it weighed the vaccine developments against the reality of a severe surge in cases across much of the United States. The Dow Jones Industrial Average (^DJI) was down about 0.55% at 11:30 a.m. EST.
More restrictive measures have been put into place in California, Oregon, and Washington in an effort to slow the spread of the virus, and more states may be forced to follow suit in the coming weeks. The difference this time around is that there is no stimulus package from the federal government to help people makes ends meet.
Consumers were still spending freely in the third quarter, if results from Walmart (WMT 0.18%) and Home Depot (HD 2.12%) are any indication. Walmart reported a huge increase in e-commerce sales, and Home Depot continued to benefit from robust demand for home improvement products.
Walmart reports solid sales growth
Walmart's third quarter wasn't quite as strong as its second quarter, which is not surprising given the absence of additional economic stimulus. But the megaretailer still managed to post solid sales growth driven primarily by e-commerce.
Walmart generated $134.7 billion of revenue in the third quarter, up 5.2% year over year and over $3 billion higher than analysts were expecting. U.S. comparable sales jumped 6.4%, with strength in general merchandise, health and wellness, and food.
E-commerce was the star of the show. U.S. e-commerce sales soared 79%, contributing 5.7 percentage points to the overall comparable sales growth. Sales were strong across all of Walmart's e-commerce channels, including Walmart.com and the company's online grocery service.
Walmart spent $600 million on expenses related to the COVID-19 pandemic during the quarter, but the company still managed to grow the bottom line. Adjusted earnings per share came in at $1.34, up from $1.16 in the prior-year period and $0.15 ahead of the average analyst estimate.
With cases of COVID-19 surging in the United States, the stocking-up behavior demonstrated by consumers early in the pandemic may be once again boosting Walmart's sales. The company also launched its Walmart+ membership program in September, which provides free same-day delivery of groceries and select general merchandise. With the pandemic ramping up, that service could find plenty of customers in the coming months.
Despite the strong earnings report, shares of Walmart were down about 0.4% by late Tuesday morning. The stock is still up about 28% since the start of the year.
Home Depot's booming sales continue
With spending on travel and entertainment still deeply depressed due to the pandemic, consumers are continuing to spend big on home improvement projects. Home Depot reported a 24.1% rise in comparable sales in its third quarter, driven by "the continuation of outsized demand for home improvement projects."
Home Depot reported total sales of $33.5 billion, up 23.2% year over year and $1.74 billion higher than the average analyst estimate. Earnings per share came in at $3.18, up from $2.53 in the prior-year period and $0.15 better than analyst expectations.
In a sign that Home Depot believes this increased demand is here to stay, the company is transitioning from temporary programs to boost pay and benefits for its employees to permanent measures. Home Depot expects to spend about $1 billion on an annual basis on permanent compensation enhancements for its frontline hourly employees.
What happens to sales of home improvement products once the pandemic is over remains to be seen, but for now Home Depot is experiencing a historic level of demand. Shares of Home Depot were down about 3% by late Tuesday morning, with the market apparently unimpressed by the company's exceptional results. The stock is up about 24% this year.