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Retailers’ Q1 Earnings “A Perfect Storm of Strength”
U.S. retail earnings for the first quarter are proving to be “a perfect storm of strength,” according to Fitch Ratings. Ongoing tailwinds from government stimulus and discretionary budget savings from reduced services spend combined with “budding enthusiasm over vaccines, re-openings and some return to normalcy.”
Industry giants like Walmart, Target and Home Depot reported Q1 revenues up 15% to 40% above Q1 2019 levels. “Many categories are maintaining the strong trajectories experienced in 2020 with weaker segments like department stores ‘joining the party’ due to easing comparisons and a budding desire to refresh wardrobes in anticipation of more time spent outside the home,” according to Fitch.
More challenged categories like department stores and apparel should see continued growth through 2021, although Fitch expects overall sales to remain below 2019 levels. Sales recovery could be constrained further by potential supply shortages.
The rating agency said that stronger survivors in the category should also benefit in the medium term from accelerated competitive retrenchment and limited new store openings. However, revenues may moderate as retailers’ share of wallet faces increasing competition from travel, entertainment and other services.
- ◦Economy
