Earnings Results Show Discount Retailers Have An Edge In The COVID-19 Era
With earnings season wrapping up, the last few weeks have been all about the late-reporting retailers. And within that story is another tale about the resilience of discount retail, one that is giving us a rare glimpse of optimism during these unprecedented times.
Costco Wholesale Corporation
Costco Wholesale Corporation (NASDAQ: COST) will report earnings after markets close today and investors are eager to see whether e-commerce has benefited in the midst of the pandemic. Expectations are positive, with analysts expecting the company to have benefitted from consumers' focus on essentials during the months-long quarantine. Prior earnings reports from the company also suggest momentum is on its side, with Costco even having raised its dividend payout in the prior quarter while many other companies were slashing theirs.
Dollar General
The Goodlettsville, Tenn.-based discount store chain Dollar General (NYSE: DG) just reported its third-quarter earnings and blew away estimates. Revenues rose 27.6% year-over-year to $8.4 billion, with recent high demand driven by COVID-19. Net income amounted to $650 million, or $2.56 a share. That's an increase from $385 million, or $1.48 a share, in the same period last year. Despite still seeing elevated demand in the current quarter, the company withdrew full-year guidance because of the uncertain dynamics of this crisis.
Dollar Tree
Also reported today, Dollar Genera's rival Dollar Tree Inc. (NASDAQ: DLTR) also saw a surge sales as they increased quarterly revenue from $5.81 billion last year to $6.29 billion in 2020's first quarter. However, it came at a cost of its net income, which dropped from $267.9 million to $247.6 million, resulting in $1.04 per share earnings. Nevertheless, its shares still jumped 3.4% in premarket hours as first-quarter earnings and sales managed to beat expectations.
The TJX Companies
Unlike its counterparts, The TJX Companies (NYSE: TJX) delivered a stinker of first-quarter earnings report that shows collapsing sales figures. It wasn't much of a surprise considering that the company closed not only all of its stores but also its e-commerce site when the pandemic hit in March. But sales look to have rebounded as soon as stores reopened at the beginning of May. By May 24th, overall sales were up from a year ago, which boosted the stock by nearly 7%. This does show that, despite the advantage of offering bargains, the company has a disadvantage in its reliance on its physical locations. Despite burning a ton of cash, the company believes it has enough to keep going for the rest of 2020, and traders are expecting the company to reveal its potential in the coming months due to consumers becoming more cost-conscious.
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