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Four Major Takeaways From This Week’s Earnings — From Department Store Partnerships to Shipping Crisis Strategies

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It was a big week for retail earnings.

Across the board, almost all companies beat earnings and sales expectations, highlighting a general trend towards recovery from the pandemic. Earlier in the week, results from Walmart and Target pointed to a big-box advantage in the back-to-school and early pre-holiday season. But even department stores (Macy’s and Kohl’s) and luxury brands (Tapestry) posted better-than-expected results as well.

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Off-pricers Ross Stores and TJX Companies and footwear retailer Foot Locker also posted soaring results this quarter.

Among the positive results, the earnings this week also pointed to current trends in the retail industry, such as shipping delays, a shift towards comfort-focused footwear and apparel, an investment in brand partnerships, and cautious optimism.

Here are five trends to take away from this week’s financial reports.

Big box stores are managing the shipping crisis well

Both Target and Walmart beat expectations this week. Target reported a total Q2 revenue of $25.2 billion, with a growth of 9.5% compared to last year. Walmart’s total revenue was $141.0 billion, up 2.4%.

While port congestion and shipping disruptions have been a major issue for retailers this earnings season, Walmart and Target have notably implemented certain strategies to mitigate the impact of the slowdowns, such as securing supply early, chartering vessels, expediting orders, and pivoting to larger order quantities upfront.

Both big-box retailers maintained confidence in their abilities to manage stock and meet demand during the upcoming holiday season.

Comfort rules, but dressy is coming back

Tapestry, the parent to Coach, Kate Spade New York, and Stuart Weitzman, reported signs of a comeback for dressier footwear styles amid success in its comfort options.

Jelly flats and sandals from Stuart Weitzman and Coach were standout performers in footwear for Tapestry. Coach also saw success in its sneaker offerings.

Despite the overall pivot to comfort and casual, Tapestry’s latest results also showed signs of a return to dressier styles as more people return to the office and social events like weddings.

Department store partnerships abound

Macy’s and Kohl’s both hiked up their outlooks for the remainder of the fiscal year after strong results this quarter. Both companies highlighted new partnerships with brands meant to help drive traffic in stores and online.

In December, Kohl’s announced a 10-year partnership with Sephora to roll out 850 Sephora shop-in-shops inside Kohl’s stores by 2023. The launch began earlier this month and Kohl’s plans to open 200 of these stores in 2021.

“We believe that this collaboration will quickly become one of the industry’s most differentiated and largest partnerships,” said Kohl’s CEO and director Michelle Gass in a call with investors.

Macy’s announced an exclusive partnership with Toys ‘R’ Us this week. The department store will sell products from the brand in more than 400 stores and online through a partnership with WHP Global, a brand management company that acquired a controlling interest in Tru Kids, the company that bought the Toys ‘R’ Us brand in March.

Cautious optimism

Given the nature of the current retail environment and constant developments with the Delta variant, some retailers opted out of sharing projections for the rest of the fiscal year.

Foot Locker reported total sales were of $2,275 million, marking a year-over-year increase of 9.5%. Comparable store sales Increased 6.9%

Despite the strong results, CFO Andrew Page said the company is “cautiously optimistic” about the second half of the year.

“Recognizing we are still operating in an uncertain environment due to COVID-19, we continue to keep a close eye on the business, including temporary store closures and supply chain challenges, and we remain disciplined with expense management,” he said.

TJX Companies, the parent to Marshalls, T.J. Maxx, and Home Goods, also avoided forecasts, citing possible temporary closures in the future if new COVID-related regulations are implemented.