This Week In Retail - February 22nd

January Retail Sales Growth Beat Estimates By 342% As CVS, Bark Box, Pepsi And Ahold All Best Earnings, And Walmart’s Results Were Mixed

Source: NY Times

Retail’s January sales numbers crushed analyst expectations, which we projected weeks ago based on reading early earnings data. We are also predicting this to happen all year long in our 2021 Retail Predictions, which is a good read on the underlying factors.

Analysts had projected a 1.2% increase and the numbers came back at 5.3% (+342%). Electronics and appliances increased the most, up 14.7% , furniture and home furnishing stores were up 12% and online spending at eCommerce jumped 11%. Even hard hit food and drinking places saw a 6.9% rise. Among store types, Department Stores did surprisingly well, jumping 23.5%.

Perhaps what’s most striking is that retail spending is well above the 10 year growth slope, showing that positive economic conditions (stimulus, savings, quantitative easing, minimum wage hikes, etc.) far outweigh pandemic effects, setting up a tremendous year for retail.

Walmart Misses Profit Forecasts Even As Same Store Sales Show Record Lift

Walmart’s earnings were a mixed bag. Excluding UK and Japan operations which are loss leaders, Walmart earned $1.39 per share, missing analyst estimates of $1.51 per share (-8%). As a result shares dropped over 6% on the news.

Same store sales saw 8.6% growth, but that may be decreasing announcing they expect moderate growth in 2021, likely a function of people returning to normal post-vaccination with less grocery driven trips. eCommerce growth also slowed in Q4, which is not surprising and a trend we expect to see throughout Q1 and Q2.

But within the earnings there were plenty of bright spots. Total revenue grew by 7.3% to $152.1 billion from $141.67 billion a year earlier, beating Wall Street’s expectations of $148.30 billion by 2.8%.

Walmart is raising its dividend by a $0.01 to 55 cents per share and approved a $20 billion stock buyback program. Walmart announced raising wages for its 425,000 workers, which analysts may see as a negative pressure on earnings and a result of increasing competitiveness in the logistics and fulfillment job market, but will also create wealth that will convert to sales. Walmart stock dropped 6% on the news, but fully recovered by the end of the week.

CVS Beats Earnings As Covid Vaccinations Become Key Trip Driver For 2021

CVS beat its earning expectations by by 4.8% on revenues of $69.55 billion, vs $68.75 expected (+1.2%). Same-store sales grew 5.3% versus a year earlier with the pharmacy division up 7.5% is prescription volume rose, but the front of house down by 1.8% with less discretionary trips.

One new trip driver will be the COVID vaccine, for which they have the capacity to administer up to 20 million vaccines per month, depending on supply. That could be a big lift on earnings, although their guidance on growth was conservative. One area they have invested in heavily is converting 750 of their stores into Health Hubs, with more health services available and a new layout that heavily leverages digital signage. The Covid vaccine trips are a way for CVS to show shoppers the new side of CVS.

Ahold Delhaize Beat Sales Guidance, As It Continues To Invest In Automation

Ahold announced its sales rose 18% to $23.7 billion, beating its guidance. Underlying operating income in the period was $9.7 billion, also beating consensus forecasts. They lost $10.9 million for the quarter, pointing to $1.01 billion in one time U.S. multi-employer pension plan withdrawal and settlement agreements.

Online sales jumped 84% to $3.1 billion with increases of 129% in the United States and 73% in Europe. Ahold gave guidance that they expect group net consumer online sales to grow over 30% in 2021, which may be optimistic as more turn back to in-store shopping and restaurant dining after getting vaccinated. eCommerce may also have dragged on profits, as eCommerce isn’t profitable in the grocery segment.

Ahold Delhaize USA is currently operating multiple warehouse automation and fulfillment tests (see below about AutoStore). Additionally they have tests, including a multi-shuttle pilot with Stop & Shop and TakeOff Technologies. Additional micro-fulfillment pilots will be announced in the coming months.

PepsiCo Beat Earnings As Increased Pandemic Snacking Continues

Pepsi also beat earnings as well with earnings per share: $1.47, adjusted vs. $1.46 expected (+0.7%) on revenue of $22.46 billion vs. $21.78 billion expected (+3.1%), which is up 4.8% YoY.

Mondelez International’s State of Snacking survey of 6,292 adults found 70% of millennials and 67% of those working from home during the pandemic prefer snacking over meals. The Food & Health Survey from the International Food Information Council also reported that 85% have changed their diet in some way with snacking becoming more prevalent.

BarkBox Releases Preliminary Results Of 78% YoY Growth As Pet Category Continues To Grow And Become More Competitive

Barkbox released preliminary results ahead of its planned IPO through Northern Star. Subscriptions in the period grew 47% from last year to 1.1 million, and new subscriptions growth outpaced annual growth at 66% year over year to 381,000, as more Americans than ever are getting new pets. One downside was that acquisition costs increased 7% from last year to $60.40, further inhibiting Bark's profitability prospects. That reflects greater competition in the pet category but also a trend we have seen online in other direct-to-consumer brands like Chewy, Wayfair, and Casper, and illustrate why it is so difficult to be profitable by selling goods primarily online. That’s why we say eCommerce is overrated and had a webinar outlining the reasons.

The Shipping Wars Further Degrade eCommerce Margins

"Free shipping is a margin killer, and part of the online race that Amazon and Walmart are driving as they battle for supremacy," says Mark Ryski, Author, CEO & Founder of HeadCount Corporation. "Most other retailers are in a difficult spot with shipping and logistics costs. As noted, shipping costs are significantly impacting margins that are unsustainable for most retailers and while Amazon and Walmart can compete in the free shipping world, most other retailers can’t and shouldn’t."

Making things even more difficult, online shipping costs are projected to increase further this year. “The recent growth in shipping costs has been fueled by the surge in e-commerce penetration, which has created a significant supply/demand imbalance and left carriers capacity constrained,” Jeffries’ analyst Janine Stichter said. Holiday shipping surcharges are projected to continue even with 5-6% price increases, as Amazon continues to change customer expectations and FedEx and UPS struggle to keep up, let alone the self-inflicted mess at the USPS.

This Week In Retail Tech Implementations

Every week we cover the top retail technology updates and implementations. There’s plenty of technology updates in eCommerce and online advertising, but that’s not our focus. We focus on where 80% of retail transactions occur - in-store. This week was all about investments and M&A. This Week’s Top Retail Technology Investments include:

• Standard Cognition raises $150 million to deliver computer vision to 5,000 stores in next 5 years, after successful trials with Circle K and the University of Houston.
• Amazon buys Australian eCommerce platform Selz to compete with Shopify
• ApplePay now supports Bitcoin through BitPay’s wallet
• NCR acquires Freshop to deliver omnichannel capabilities on top of its POS
• Locus Robotics has raised $150 million after expanding over 40 customers and supporting 300 million items picked
• Ahold Delhaize has is partnering with AutoStore for a robotic warehouse in Philadelphia for eCommerce grocery picking.
• David’s Bridal release a wedding dress AR experience (but not virtual try on)

If you want to read more about any of these launches and what they mean to the #retail industry, check out This Week's Retail Tech Investments. Let me know what I missed and what I should add to next week's.

READ THE FULL ARTICLE

During this webinar we will walk you through the retail data investments being leveraged by CPG, health, and beauty brands, and how those investments drive meaningful sales.

Join this webinar to learn about:

• New behavioral analytics and technology to optimize digital marketing in-store, demonstrated by Perch’s new Shopper Marketing Cloud.
• Changing promotional and merchandising strategies at scale with A-B message testing, real-time customer engagement, and inventory data
• Anticipating demand and other important trends to optimize in-store marketing and operations
• Using WiFi, bluetooth, and computer vision to collect first-party data
• Cost-effective opportunities to respond to shifting consumer traffic patterns and on-trend inventory

REGISTER NOW

Stories To Share At The Retail Water Cooler

Amazon is being sued by the attorney general of NY over its treatment of workers during COVID, but Amazon seems to have a great defense - COVID cases amongst its warehouse workers were lower than the national average and it is spending more money protecting tis workforce than any other retail. Instead, this may have more to do with its treatment of "whistelblowers” and the firing of people who voiced concerns over safety and treatment of workers. It has dovetailed into a conversation on the overall treatment of workers, extreme quotas with documented behaviors of employees urinating in bottles to make sure they didn’t lose time going to the bathroom.

Wisconsin’s mink farmers are getting vaccinated ahead of teachers and other essential workers due to the ability for mink’s to get Covid and pass it to humans. Sound far fetched? Take a look at Denmark where they had to kill 17 million of mink proactively to prevent new strains from infecting humans and now they are “rising from their graves. <Insert spooky music>

According to a 2021 Leafly Jobs Report, legal cannabis now boasts 321,000 full-time jobs, expanding 36% or 77,000 jobs during the pandemic. That’s good news for legalized states, providing more resilience for physical retail jobs. Legislators in Connecticut, Florida, Hawaii, Kansas, Washington State and Virginia are considering psychedelics and drug policy reform bills in 2021.

Top Retail Marketing Blog Posts:

2021 Retail And Retail Technology Predictions From Perch CEO Trevor Sumner

The Definitive Guide To Interactive Retail Smart Shelves (2021)

The Post-Covid Rise Of QR Codes In US Retail And The Retailers That Use Them

Trending Blog Posts

2021 Retail And Retail Technology Predictions From Perch CEO Trevor Sumner

Perch CEO, Trevor Sumner, has published an article looking forward and breaking down his retail and retail technology predictions for 2021.

The Definitive Guide To Interactive Retail Smart Shelves (2021)

In this article, we walk you through the smart shelf technologies that are revolutionizing the way the retail industry delivers educational content, pricing, and in-store promotions, ratings, and reviews on the shelf.

The Post-Covid Rise Of QR Codes In US Retail And The Retailers That Use Them

QR code usage is exploding due to technological changes and Covid-19 use cases. Find out how retailers are using them.