Walmart, Home Depot, Kohl's top quarterly estimates

Although the COVID-19 has mostly hurt retailers, some big names such as Walmart, Home Depot and Kohl’s reported numbers that topped street estimates. Yahoo Finance’s Emily McCormick joins The Final Round to break down how the pandemic is impacting retailers.

Video Transcript

SEANA SMITH: And Walmart and Home Depot, very strong numbers from both companies. Emily McCormick joins us now with more on this. And Emily, when you dig into these reports, it's hard to find anything negative. I mean, Walmart e-commerce sales up nearly 100%, Home Depot store sales jumping 25%, yet both stocks trading to the downside today. Help us make sense of what's happening at this point.

EMILY MCCORMICK: Yeah, absolutely, Seana. So as we mentioned, hard to find anything negative about the reports for the second quarter. But the issue here was really that both Walmart and Home Depot highlighted the fact that they're not expecting to see the same pace of growth, particularly on the top line, heading into the current quarter and the back half of the year.

So taking a look at Walmart, again just to highlight some of those strong points, 9.3% comparable same-store sales growth in the US, much better than the 6.4% rise that had been expected. Of course, e-commerce was the standout here with a gain of 97% over last year and extending a gain of 74% from the previous three-month period.

Now, we didn't really get too many details this morning from Walmart on Walmart Plus. That's its subscription service that's reported to be a potential competitor here with Amazon Prime. We had CEO Doug McMillon say that the company is still planning on rolling that out in the near term and that it would provide more details when the time was right. But again, not giving too much granularity at the moment, anyway.

But again, just looking to the result that we saw for the second quarter and then looking ahead, one of the things that both Walmart and Home Depot highlighted was the fact that they were expecting to see weakness on the consumer spending front in the absence of further fiscal stimulus from Congress, so really putting corporate pressure here on lawmakers in order to pass another fiscal stimulus bill, to get more money into the pockets of consumers, to the unemployed, or through direct checks, since those did contribute to some of the boost that we saw on the top line for both Walmart and Home Depot's results.

And the last thing I want to point out, too, is if we think about some of the earnings results that we've gotten not just from these retailers, but from some of these companies that posted weak second quarter results, posted declines on the top line over last year or swung to a loss, many of those companies highlighted the fact that the second quarter was going to be their worst point. But if we think about Walmart and Home Depot, really, these companies highlighted the fact that the second quarter was, in a sense, the best point for them during the pandemic, since they were some of the winners, if you will, from the stay-in-place orders, the fact that people were turning to online, looking for DIY projects. And because of that, for them, normalization is actually lowering from the trends we saw in the second quarter. And I think that's why we're seeing these stocks actually give back some of those gains during yesterday-- or during today's session, Seana.

SEANA SMITH: Yeah, Emily, it's interesting because we're going to hear from another a number of other retailers tomorrow and also Thursday. And this really sets the bar high for names like Target or some of those more discount retailers that we're waiting for results from because we've been talking about the fact that the battle has really escalated inside retail and the coronavirus has really, I guess, proven the fact that there are clear winners and clear losers. So I'm just curious just what you think we would hear from Target or some of these other competitors at this point, whether or not they're exposed to some of the weakness that maybe Walmart is also seeing in its current quarter and what that could mean for their businesses here down the road.

EMILY MCCORMICK: Yeah, I think especially seeing Walmart's results, a lot of times Target does tend to mirror these pretty closely just because they're also a big-box retailer, also sort of on that everyday low-cost price point. If we think about Target-- or we think about Walmart actually, we did see their gross margins actually expand in the second quarter. That's something that had been an issue for Target in the first quarter, so potentially some upside surprise potential for Target to see a broadening out in some of the products mix shift outside of those low-margin food and necessities from the first quarter, potentially see more clothing sales, which would be a positive for margins and a positive for profit.

So I think that's one thing to keep in mind here, also just any commentary around the back-to-school season and the holiday season and whether either Target or TJ Maxx and some of these other companies-- Ross Stores-- that will also be reporting. How they're handling inventory heading into that will also be important. We also had Kohl's report earlier this morning, and they mentioned that they were going to take a conservative approach to the back-to-school session and the second half of this year. So I wouldn't be surprised to see Ross and TJX companies with that same strategy.

SEANA SMITH: All right, Emily McCormick, thanks so much.