US retail sales appear to be picking up steam since the beginning of 2019, with the last 5-months demonstrating month-over-month growth. Q2 earnings in the retail sector have been mixed thus far with a consumer trend beginning to reveal itself.
The big-box discount retailers are thriving, while higher-end department stores couldn’t hold on to foot-traffic in the Amazon AMZN driven retail apocalypse. Which firms will survive this epic consumer shift that is likely going to reshape the retail market as we know today?
Value centric firms like Target TGT, Walmart WMT, and TJ Maxx TJX illustrated favorable results provoking a positive price movement following their earnings releases. These stocks have all outperformed not only the retail sector but the broader market.
Target specifically stands out with an almost 20% gap-up this morning following an exciting earnings release before the bell. Target had a big top and bottom-line beat that illustrated expanding margins. The company was able to increase it’s in-store foot traffic while expanding its online presence.
Meanwhile, large higher-end department stores like Nordstrom JWN, JC Penney JCP and Macy’s M struggle to keep their share prices afloat. These stocks have all lost more than 40% of their market value since the beginning of the year with this most recent Q2 earnings release only confirming investor concerns.
The Consumer Shift
Millennials are changing the landscape in which businesses operates, with Silicon Valley leading the charge. Our world is becoming centered on the interconnected digital network we call the internet. The internet was built to hold and share data, making the transfer of data timely and seamless. Today the internet is allowing for a timely and seamless transfer of goods.
We, as millennials have grown up to recognize convenience and value as standards of living. Why go to the store when you can just make a few taps on your phone and get almost anything delivered to you? Why pay more at Macy’s when you could get the same thing cheaper at TJ Maxx? At least these were the ideals instill into me by this generation.
Department retailers like Nordstrom, JC Penney, and Macy’s are massive, cumbersome stores that cause anxiety to me and my cohort. Navigating these stores is a chore in and of itself. These firms have all invested in an ecommerce platform and run an increasing number of promotions to bolster foot traffic, but their core business model just doesn’t appeal to as many millennials.
Target, Walmart, and TJ Maxx have all been able to meet the shifting consumer’s needs successfully. Target provides customers with both value and a manageable store layout that is aesthetically pleasing. Target brand products have become increasingly popular amongst millennials who see Target’s fashionably comparable clothes a deal at their lower price point.
Walmart is the largest retailer in the world and has gained this title with its price leadership in the retail space. They have continued to invest in their online presence, which has been yielding ecom market share gains. Walmart has consistently displayed topline growth as it shifts to meet consumer needs.
TJ Maxx has seemed to weather the brick-and-mortar retail storm, being able to meet consumer needs through its brand name value proposition. As Amazon and the rest of ecommerce force more and more retailers into bankruptcy, venders have an increasing need to offloading old/unwanted inventory. TJ Maxx has been able to fill that gap while pulling in more foot-traffic. Millennials like the hunt for a great deal and TJ Maxx is one of the best places for that with name brand products sold at deep discounts.
Amazon and its ecommerce wave have swallowed up 10s of thousands of brick-and-mortar stores in the retail apocalypse. Retailers everywhere are scrambling to find their niche with the shifting consumer.
Value and convenience seem to be the key characteristics driving millennials consumption patterns. The firms that are unable to meet consumer needs will open market space for those that are capable of leveraging their offering to the evolving customers.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
The TJX Companies, Inc. (TJX) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Target Corporation (TGT) : Free Stock Analysis Report
J. C. Penney Company, Inc. (JCP) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
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