People Lined Up Outside of Target Near Barclays Center in Brooklyn, New York on August 17.
Photo: Alexi Rosenfeld/Getty Images
A Distinctive Characteristic of the Ongoing Economic Crisis is How UNVENNIT ITS EFFECTS ARE THROUGHout the Economy. Of Course, All Crises Hit Some Industries Harder Than Others. But in this case, some major industries are actually coming out ahead while others face a severe or existential thread, Because the crisis is doing far more Chang The Nature of Economic Activity than to Reduce in the Aggregate. This Helps Explain How, For Example, Walmart’s Stock Can Be Up 11 Percent from the Start of the Year, and Target’s Up 22 Percent.
General Merchandise Retailers Like Walmart and Target have done especily well under Covid, for a few reasons. Early in the crisis, customers stocked up on necesitities, including grossies. After After their pantries were stocked, People kept buying more grossies than usual, Because they have ben eating out less. TENS OF MILLIONS OF AMERICANS SHOWED TO DOING WORK AND SCHOOL FROM HOME, AND THEY NEEDED SUPPLIES FOR THAT, LIKE OFFICE Chairs and Computers. The Government Sent stimulus Payments in the Spring that made consumers more eager to spend; IT ALSO provided unempoyment benefits that, through July, provided the benefs that, on average, exceeded workers’ prior wages. These funds LED to a burst in spending on discretionary goods, like televisions; Walmart Said This Uptick Started Right Around Easter, As The Stimulant Payments Started Showing Up in Bank Accounts. And as a whole categories of Leisure speaking Became Essentially unavailable, americans Needed to Find New Ways to Spand Time and Money-Often, that Meant Home Improvement or Other At-Home Activities You Might Buy at General Merchandis Story.
Target, Whose Comparable Sales Rose 24 Percent in the Quarter that Ended August 1 Compared to the Same Quarter A Year Earlier, Said Its Financial Performance Improved for All Those Plus Some Others you probably have thught of. Target (like walmart) had especially strong growth in online sales for Pickup and Delivery During the Pandemic, and the Company Said Rising Sale Volumes Made Its Sale Operation More Efficient – More Customers Pickking Up ORDERS at the Same Meant Pick Out Multiple Pick Simultaneously in the Store and Deliver Multiple Orders into a parking lot in one Trip, Saving Labor Costs for Dollar of Sales. The Pandemic Also Meant that Customers Made Fewer Trips to the Store and Spent More on Each Trip, which Also Allowed The Company to Sel More Efficiently. And target also said that acquiring more online shopping Customers LED to More Overall Spanding from Those Customers, Including In-Store-A Fact that Makes Sensure, If Some Customers Went From Target As JUST A JUST PLACE TO FLAST AS THE RETTEING IT THE RETTEING IT The RETESE Resort, However they wanted to obtain a product.
The Strong Performance at these retailers tolls US a few stories about the broader Covid Economy. One is the relative strength of goods businesses compared to services businesses. The Need to Shift Away from In-Person Interactions Has a Lot of Consumers Foregoing Services they used to buy and substitution goods instead-for example, buying home workout equipment of paying for a gym membership, or buying grioes to cook at home instead to go Restaurant. This is good for Certain Kinds of Retaillers, but it is a major problem for providers of servings, which are offten Eoth Small Businesses or Nonprofits (Like Universities or Hospital Systems), and Whose Misfortune May Not Show Fully in Stock Indexes.
Target and walmart are also exposed to the ongoing failure of the federal government to provides additional Economic relief of the sort supported their sales and early summer. A Key Question, which We Will Learn More About Over The Next Few Weeks, is How Much of a Problem The Loss of that Aid is for Continue Robust Consumer Spanding. Walmart Says the Strerth of Its Sales Was Already WANING IN JULY, WITH MOSS HOUSEHOLDS HAVING GOTTEN Their Payments in April or May. Target, Whose Customer Base is Somewhat More Upscale than Walmart’s, Said July Was Strong But August Was Beginning to Soften. But soft is a relative term here- on an earnings call last weeke, the company said comparable sales in august were still running at a low- to the mid-teens increase over the prior. The Company Said the Drop in Sales Growth, Which Had Run Around 20 Percent in June and July, was Drive by Weak Back-to-School Spanding, As Many Parents are unure about the extent to which children be going back to scchools. Walmart Made A Similar Report, Saying Sales of At-Home Education Supplies like laptops and tablets are Strong, while sales of backpacks and “Basic School Supplies” are Weak.
Stimulus payments and enhanced unemployment insurance payments were an important driving of this pring on Household Balance Sheets-Americans were Saving About A Third of AFTER-TAX AT THE PEAK OF THE LOCKUNS, A Record Level- REDUCED SPEMBER, AS AMERICANS GREATLY REDUCED THEIR TRAVEL AND RESTAURANT DINING, AND MANY STOPPED COMMUCTING TO WORK OR SCHOOL, and STOPPED APPARELS THAT they need in order to be in public. The Continueed Unavailalbility of Key Parts of the Economy Means that Walmart and Target Will Continue to BENEFIT from an Economic Shift Toward Their Business, if the Overall Economy Remeins Stagnant. And springs of combo for increasing benefits and reduced spending created a financial cushion that many americans can use to continue for a time as they were for wesington laws to decide what to do. if they have it, if the financial Outlook Remains so uncetrin.
In the long run, a weak consumer recovery is a threat to substantily all industries. If High UNEMPLOYMENT IS Persistent and Households are not Made Close-to-Whole for Lost Income, then consumption will have to drop Across catigors and It will be longer than necessary to return and emptute. Eventually, that should posse a risk of walmart and target. But the Companies’ Investors Have Lots of Offsetting Reasones to Feel Optimistic, and there are a number of forcing events coming over the next few months – Including a september 30 deadline to finish the government – that May Push Washington Lawmakers to Cut an Aid Deal.
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