Rewriting the Retail Rule Book

By Glenn Dyer | More Articles by Glenn Dyer

A feature of retailing’s performance in the pandemic is how a host of what appeared to be lumbering giants have moved quickly to reposition their offerings onto the online space.

While the likes of Walmart have been spending heavily for years to battle Amazon and other online giants, other US retailing names have been doing much better than expected.

In Australia we have seen something similar – Myer for example suffered a 13% slide in sales for the first half to $1.4 billion, but its online sales exploded, surging 71% to $287 million – that’s 21% of total sales, much higher than the industry average of between 10% and 11%. (That’s heading for half a billion dollars)

David Jones sales fell 8% for the half, but online sales jumped 55%. Stablemate Country Road Group saw sales fell 5.2% but online grew 52.5% in the half year.

Wesfarmers saw $2 billion in online sales for the December half across its businesses (Bunnings, Kmart, Officeworks, Target, plus Catch). Woolies saw online sales of $2.9 billion across its businesses, up 79%.

The likes of JB Hi Fi, Bapcor, Super Retail Group, Adairs, Accent Group, The Shaver Shop all saw another half of solid growth in online sales after the surge in the five four months of 2019-20 as the GFC hit hard and lockdown the economy.

But sales growth – both bricks and mortar and online will moderate this year from these very high levels and because of a higher comparative base from March onwards and from July to December.

In the US it’s a similar story – mighty Walmart still occupies the top spot.

Walmart’s revenue was up 6.7% for the 2020 year reaching $US559 billion, keeping its top ranking as the largest US retailer followed by Amazon which reported revenue of $US386 billion for its financial year.

Walmart’s USA division saw growth of 8.6% for the year. In fourth quarter the average value of each customer transaction was up 22%. In fourth quarter (November through January), Walmart’s US online sales were up 69% as compared to the industry where non-stores sales were up 23%.

But that rise of 69% was down on the 80% in the previous three months to the end of October.

Macy’s – America’s biggest department store chain – seems to have made online sales the priority – but that has come as considerable cost to its core bricks and mortar stores (which it continues to close)

Macy’s 4th quarter online sales (ended January 31), rose by 21% year-over-year, to $US3.0 billion, or for 44% of its total net sales. But its brick-and-mortar sales in the 4th quarter collapsed by 35% to $US3.8 billion, accounting for only 56% of Macy’s total sales.

At this rate, brick-and-mortar sales will be down to less than half of Macy’s total sales by the end of 2021 and more stores will have to close.

Nordstrom is the surviving upscale department store chain in the US (after Neiman Marcus went bust last year). This week Nordstrom reported better-than-expected revenue for the holiday quarter, aided by a rise in online and growth in its off-price business, Rack.

Overall sales at Nordstrom Rack fell 23% from a year earlier, but that was a bit better than previous quarter’s 32% slump. Digital sales of about $2 billion in the reported quarter accounted for 54% of the retailer’s total business.

Total revenue fell 19.7% to $US3.65 billion in the fourth quarter ended January 30. Same store sales fell more than 17% in the 4th quarter, thanks to lockdowns and the pandemic.

Much of the growth expected in 2021 will be driven by Macy’s digital business. The company now expects annual online sales to reach $10 billion within the next three years.

Target is the number 2 bricks and mortar retailer to Walmart. Its 4th quarter results this week saw a similar story.

The moves come as Target extended its sales streak through the holiday quarter and sales grew by more than $15 billion. That exceeded the company’s annual sales growth over the past 11 years combined.

Online sales last year surged by almost $US10 billion in the 2020 year.

Fourth-quarter profits soared 66% and sales jumped 21%. Sales at stores opened at least a year rose 6.9% compared with the same period last year. Online sales soared 118%. Customer traffic in stores rose 3.7%, and average dollars spent rose 15%. In the third quarter, same-store sales rose 10%, while online sales jumped a massive 155%.

Target picked up $9 billion in market share from rivals in fiscal 2020.

Big-box stores including Home Depot, Lowe’s and Walmart all had huge fourth quarters with Americans still consolidating shopping trips.

Kohl’s, a smaller department store chain saw a 10% slide in sales in the 4th quarter but a 30% increase in profits as its online sales company’s surged to account for 42% of net sales in the fourth quarter. (more than $US2.3 billion). Net sales declined 10% to $US5.88 billion in the 4th quarter

 

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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