Third-Quarter Results: Who Is Doing Well? - Lift361

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Third-Quarter Results: Who Is Doing Well?

By Ed Higdon. Posted in Analytics | Insight

November 30, 2018

Retailers are in the midst of releasing Q3 earnings, and once again, we are seeing familiar names making gains in the market. After years of doom-and-gloom, the retail sector continues to grow. One of the trends repeated among stores that are outperforming expectations is a shift in approach. Brands are focusing on and capitalizing on their own unique strengths, rather than attempting to compete in the “Amazon sandbox.”

Investors are feeling good about the upcoming holiday shopping season, and several retailers are moving toward Black Friday with reasons to be optimistic.

Walmart

  • Total revenue increased 1.4% to $124.9 billion from last year.
  • Q3 Sales totaled $80.6 billion, a 3.7% gain from last year.
  • Same-store increases of 1.2% in traffic and 2.2% in ticket size.
  • E-Commerce sales up 140 basis points.

Walmart reported sales gains once again in Q3. Driving the success appears to be their grocery pickup and delivery options. Walmart currently has 2,100 grocery pickup locations with 700 new locations to be added through the end of the fiscal year. On their earnings release call, company leaders noted that grocery pickup has delivered some of the highest Net Promoter scores Walmart has ever seen. To further capitalize, Walmart expects to reach 40% of the US population with grocery delivery options over the next fiscal year.

Home Depot

  • Continued to beat its five-year-long trend of outperforming estimates.
  • Q3 Earnings of $2.51 per share, up nearly 37% from last year.
  • Net sales increase of 5.1% to $26,302 million last year.
  • US store comp growth of 5.4%

Home Depot’s continued growth stems from an increase in product assortment and a focus on enhancing the omnichannel experience for customers. They continue to invest in hiring technology professionals to create a user-friendly web and mobile experience. A strong economy and low unemployment have also rejuvenated interest in home improvement projects in both professional and DIY categories.

Macy’s

  • Adjusted earnings up 17% from last year.
  • Comparable sales increased 3.3%

Macy’s has made headlines in recent years for a rash of brick-and-mortar store closings but stunned Wall Street in Q3 by outperforming expectations. The earnings release was a mixed bag with revenue slipping slightly but keeping pace with forecasts and posting overall sales gains for 2018 so far. The company is investing full-throttle in improving the online shopping experience and the in-store experience as the holiday season approaches.

Expectations For Other Major Retailers

Major retailers are still releasing earnings for Q3, but Wall Street is predicting that several trends will continue from Q2. Urban Outfitters is expected to continue its strong showing thanks to high consumer confidence and investments in their in-store experiences. Target is also expected to report gains thanks to significant investment in new store infrastructure, expanded grocery offerings and an improved e-commerce experience.

Lessons To Learn

The reasons why so many retailers have struggled under the shadow of Amazon are complex, but at the heart of those struggles has been a failure to adapt quickly to evolving customer expectations. That seems to be changing as retailers look both inward and outward, focusing on delivering their best products and services and strengthening those areas.

Walmart continues to see great results with their convenient grocery pickup and fast delivery options. Interestingly, Walmart also revealed they will begin targeting younger, wealthier customers by offering new premium brands like plus-size clothing brand Eloquii, menswear line Bonobos, and online indie clothing retailer ModCloth. In addition, a recent acquisition announcement of major Indian online retailer, Flipkart, has revealed Walmart’s long-term strategy of capturing the growing Indian market.

Home Depot is focusing on variety and supply chain strength, ensuring customers can find exactly what they want, when they want it. They want to be a one-stop-shop for home improvement, and have added décor into the mix to provide end-to-end service. Customers don’t have to go anywhere but Home Depot to complete a facelift of a room or a full remodel of a home.

Macy’s has cut overhead by closing stores but has focused on strengthening its remaining stores by offering a wide variety of merchandise and improving their online shopping experience. They are synonymous with the holiday shopping season, and look to capitalize on Q3 gains as their most loyal holiday customers begin filling their seasonal carts.

Retailers of all sizes can learn from these successes. By understanding what customers want from their favorite stores and expanding on those strengths, they can lift sales and outperform through 2018 and beyond.