Delta Variant Weighs on Retail Sales
Retail Sales Fall in July
Retail sales declined in July, which fueled concerns about economic recovery for investors. Spending at US retailers fell 1.1% last month compared to levels in June.
This is a reversal from earlier in the summer when sales at retailers were surging and consumers flush with extra cash and a desire to spend went shopping in droves. Now, worries about more pandemic shutdowns and restrictions are weighing on consumer sentiment, which declined sharply in the beginning of August. Vehicle sales showed the most significant drop. Consumers also spent less on clothing, furniture, and sporting goods in July.
Walmart Isn’t Feeling the Impact…Yet
Walmart (WMT), the nation’s biggest retailer, has not felt the impact of rising COVID-19 cases so far. The company said it is seeing an increase in the number of customers wearing masks in stores but its foot traffic remains high as back-to-school shopping season kicks into gear. What’s more, the retailer has not seen any panic buying among consumers. This was common during the early days of the pandemic and caused shortages of toilet paper and other household goods.
For its second quarter, Walmart’s comparable sales in the US rose 5.2% while ecommerce sales increased 6%. Though Walmart did see climbing sales during the period, its growth rate in the quarter was slower than earlier in the year.
Home Depot’s Growth Slows
Home Depot (HD) also reported growth in sales during its second quarter, but that growth was slower than what the company experienced last summer during the pandemic-induced DIY boom. The retailer said demand remains strong among consumers but supply-chain issues and increasing material prices are weighing on growth. Comparable sales in the second quarter were up 4.5%. In the previous four quarters, comparable sales grew by over 20%. Business at Home Depot has remained steady in the first two weeks of August but it is not clear if that trend will continue.
Investors face significant uncertainty when it comes to the retail industry, but they will get more information soon in the form of earnings reports from other large retailers. Lowe’s (LOW) and TJX Cos. (TJX) (the parent company of TJ Maxx) are scheduled to report today, and Ross Stores (ROST) will publish results tomorrow. It will be interesting to see how the Delta variant of COVID-19 impacts their prospects.
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