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What investors should expect from big retail earnings

As the rise in coronavirus cases continues to hurt American businesses and consumers alike, big retailers like Target, Walmart, Kohl’s and others are set to report quarterly earnings. Yahoo Finance’s Dan Roberts join The Final Round to break down what to expect from retail earnings.

Video Transcript

SEANA SMITH: Certainly is interesting, especially, Ines, what you were saying there about the retail sector, because I think so many investors are going to pay especially close attention to the numbers that we're getting out this week. And Dan Roberts, I know that you're closely looking into this, but this is the first full quarter, we have to keep in mind, just that could tell us just the extent, I guess, of the impact of the pandemic here when we get these results over the next couple of days.

DAN ROBERTS: Yeah, guys, it's a big, big week for retail earnings. We've got Target, Walmart, I think Ines mentioned. We'll also hear from L Brands, the parent of Bath & Body Works and Victoria's Secret. Those earnings not expected to be good, trending in the wrong direction there.

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But Target and Walmart, I mean, those two companies alone, we're going to get so many interesting nuggets there to make hay with and for fodder on our shows. I mean, all kinds of information, not just digital sales, and that, I'm sure, we're going to see, again, those are way up. Target, last quarter, its e-commerce sales were up something like 280%. I mean, the numbers are just crazy, although it's to be expected because people shopping online.

But also, how many of their stores have extended hours? Walmart, just today, making news because it has extended the hours most of its stores are open. That's something Dick's Sporting Goods also did last week. So retail chains are really finally beginning to return to pre-pandemic.

Now, I don't mean in terms of foot traffic. I'm sure that's not the case, but allowing everyone in in masks, extending the store hours. So what's the picture with brick and mortar and how many hours and how many people they're seeing in stores, I'm sure there'll be a little reluctant to share and drill down too much of that information.

How much of a bump are they seeing with e-commerce? Walmart and Target have seen such surges recently, and even pre-pandemic their e-commerce numbers were going way up, that I think they've become legitimately in the conversation with Amazon. You know, for the longest time, it was, like, can Walmart e-commerce ever catch up to Amazon? But now Walmart and Target have seen huge gains in that area.

And then, finally, you know, let's see how much profit they've made. Because even though the e-commerce sales have been up, in many cases, the items that they're selling are cheaper items. So you might see big gains with revenue and big gains with percent of people that are shopping online, but what does the profitability look like for those two names?

MELODY HAHM: Yeah. And Dan, I think what's really interesting even thinking about the off-pricing stores like TJ Maxx, like Ross stores, those were seen as beacons of hope in the retail environment over the last couple of years. What I think is particularly notable is they don't necessarily have a great online strategy. Their e-commerce was not robust. The whole point was that you can peruse in-store. You're not actually looking for anything in particular because then you would be disappointed.

It's more of that sort of thrifting experience, and we have heard over the period of the pandemic that thrifting has gone up from reports from the likes of thredUP and whatnot. So I am curious to see when you think about even the strata-- the stratification and the wide spectrum when it comes to whether it is the high-end retailers that will carry this through on the other side of this pandemic, or if these sort of low-price discount retailers will be able to get their e-comm strategy really together during this time.

SEANA SMITH: Yeah, and guys, it's so interesting because what both of you were saying was exactly-- it was similar to what we heard from Jerry Storch last week in the 4:00 PM hour. He's the former CEO of Toys "R" Us. He also worked with Hudson Bay. And he was just talking about the fact that so many of these retailers haven't done enough.

And in this environment now it's so clear-- it's even more clear than it was before just these winners and losers and how even more of these stores, especially the ones who are struggling, need to be a little bit more proactive in this environment and need to do more things in order just to stay relevant and also just to compete with those bigger names, Dan, that you talked about up at the top there when it comes to Walmart and Target.

DAN ROBERTS: Well, absolutely. And something you just got my juices flowing on, you know, we used to talk about how the time has come where these big retail chains have to have a good online presence. But it's still-- we used to discuss it as sort of an addition, right, like, they've got the brick and mortar, but man, they need to beef up their online presence. It is becoming, or is already the case, that not only do you have to have the e-commerce presence, but soon enough, or in some cases already, it has to probably be as good or better.

I mean, we're seeing that pendulum swing pretty blatantly. That's not to say that people are not going to shop at brick and mortar stores. We've seen here and there the exceptions. But I mean, if you're still kind of building out your web presence, like some of the low-cost names that Melody mentioned, then you were asleep, and I don't see how you catch up.

I mean, Walmart for awhile, people used to say, that it was way behind, but-- but it has caught up with e-commerce and everyone else to. I mean, the chains Melody mentioned-- now, of course, the problem there is some of it is about the organic discovery, but those chains like TJ Maxx and Ross, I mean, as far as I know, those have almost no real online presence. But maybe they're businesses that are really designed for going in-person.

SEANA SMITH: Yeah, but I think they're also going to have to shift it, though, because we've seen the fact that, like you were saying, now it might even be more important to have a bigger presence and a better presence online, just because we know consumers are shifting behaviors and maybe some of these behavior traits are going to stay here past the pandemic. So certainly, we will be keeping a close eye on all of those reports as we get those numbers over the next couple of days.