The American consumer is proving more resilient than predicted.
Conventional wisdom, which initially assumed many U.S. shoppers would save their paychecks and stimulus funds until the pandemic subsided, has proved unfounded. The largest American retailers all reported sales in the latest quarter that blew away expectations.
From Wall Street to the retailers themselves to the manufacturers that supply them, it seemed no one was ready for just how brisk demand would be from a consumer base stuck inside with nowhere to go.
Home-improvement chains Home Depot Inc. and Lowe’s Cos., everything stores Walmart Inc. and Target Corp., and of course online behemoth Amazon.com Inc. each beat analysts’ sales forecasts in the summer quarter -- and by billions of dollars apiece. Companies that have been able to pivot quickly to more online sales or already had established apps for curbside pickup have done particularly well, plus those that cater to a bored American shopper looking to spend.
The “fatal flaw” of economists was assuming that people will always keep their wallets closed during tough times, leading to miscalculations about consumer demand, said Doug Stephens, founder of Retail Prophet.
The recent spate of robust retail earnings have shown the power of consumer resiliency and adaptability. They also reinforce the staggering unpredictability of pandemic times.
Going forward, this past quarter raises doubts about how seriously to take anyone claiming to have a read on America’s shopping habits, especially as Congress remains stalemated over additional stimulus and millions still out of work.
Big Six
Craig Johnson, president of Customer Growth Partners, says the “big six” retailers seeing record growth -- Walmart, Amazon, Home Depot, Target, Lowe’s, and Costco Wholesale Corp, which hasn’t yet reported -- all share some common traits. They have consistent traffic growth, rising store productivity, improved online platforms, a mix of discretionary and non-discretionary items and a clear understanding of their customers’ needs and preferences.
“On a dollar basis, households are sitting on $3.4 trillion in savings, up $2.2 trillion from last June, indicating that consumers still have a lot of dry powder waiting to spend,” he said in an email. “Retail sales are also bolstered by the steep decline in spending on travel, entertainment and restaurants.”
Lowe’s Chief Executive Officer Marvin Ellison has certainly witnessed that trend. As his company reported same-store sales in the U.S. at a blistering 35.1% rate, he says he’s seeing a behavior change in consumers.