Tuesday's Market Minute: Riding Retail's Recovery

While earnings have slowed significantly, retailers dominate the week in reports. Large-cap names Kohl’s Corporation KSS and Target Corporation TGT both reported fourth-quarter earnings and sales that topped analyst estimates this morning, signaling a retail rebound could be in the cards. With over 13% of Americans having received at least one dose of the Covid-19 vaccine, the economic reopening is gaining momentum – benefiting not only markets but also some of the traditional brick-and-mortars who have been depressed with forced store closures.

Kohl’s reported net income of $343 million, compared to $265 million in the same period a year ago. Excluding one-time charges, it earned $2.22/share, more than doubling forecasts of $1.01/share. The company’s shares are up over 45% in the last 12 months, with a market cap that now exceeds department store peers Nordstrom, Inc. JWN and Macy’s Inc M.

Target, on the other hand, saw sales growth of over 20% due to a strong holiday season and a boost from the stimulus checks. The company attributes much of its success in the quarter and over the last year to its e-commerce offerings and wide selection of merchandise. Despite the strong results, however, Target declined to provide guidance for the year ahead – noting the pandemic still makes it too challenging to foresee future consumer trends.

In addition to Target and Kohl’s, other notable retailers reporting this week include Nordstrom, Urban Outfitters, Inc. URBN, Ross Stores, Inc. ROST, Dollar Tree, Inc. DLTR, American Eagle Outfitters Inc AEO, Burlington Stores Inc BURL, Gap Inc GPS, and BJ’s Wholesale Club Holdings Inc BJ.

Discounters have undergone a unique strain versus the big box names due to their lack of online presence. With stores shuttered and a less-than-thriving appetite for apparel outside of athleisure, Ross sales were cut in half during its spring quarter and by roughly a third over the summer. Fellow discounters TJX Companies Inc TJX and Burlington Stores have also experienced similar challenges, but Ross had more stores in some of the more restricted states. Shares have gained a measly 1.5% over the last 12 months, underperforming Burlington and TJX who both gained about 13%.

However, there is hope that shoppers are eager to return to an in-person experience. New data from Placer.ai signaled discount retailers have seen an “impressive recovery pattern” in foot traffic and sales in the most recent quarter. More clarity to come on the rebound in the several types of retailers this week as companies continue to report.

Photo by Arturo Rey on Unsplash