Dow Jones Sinks Despite Strong Walmart, Home Depot Profits
While there are now two Vaccines against covid-19 which will likely go into mass production early next year, the stock market struggled Tuesday as it compared vaccine developments to the reality of a surge in cases across much of the United States. the Dow Jones Industrial Average (DJINDICES: ^ DJI) was down about 0.55% as of 11:30 a.m. EST.
More restrictive measures have been put in place in California, Oregon and Washington in an attempt to slow the spread of the virus, and more states may be forced to do the same in the coming weeks. The difference this time around is that there is no stimulus package from the federal government to help people make ends meet.
Consumers were still spending freely in the third quarter, though the results Walmart (NYSE: WMT) and Home Depot (NYSE: HD) are an indication. Walmart reported a huge increase in online sales and The Home Depot continued to benefit from strong demand for home improvement products.
Walmart reports solid sales growth
Walmart’s third quarter was not as strong as its second quarter, which is not surprising given the lack of additional economic stimulus. But the megaretailer still managed to post solid sales growth driven primarily by e-commerce.
Walmart generated $ 134.7 billion in third-quarter revenue, up 5.2% year-over-year and more than $ 3 billion more than analysts expected. Comparable sales in the United States jumped 6.4%, with strength in general merchandise, health and wellness and food.
E-commerce was the star of the show. E-commerce sales in the United States climbed 79%, contributing 5.7 percentage points to overall same-store sales growth. Sales were strong across all of Walmart’s e-commerce channels, including Walmart.com and the company’s online grocery service.
Walmart spent $ 600 million on expenses related to the COVID-19 pandemic during the quarter, but the company was still able to boost its bottom line. Adjusted earnings per share stood at $ 1.34, down from $ 1.16 the year before and $ 0.15 ahead of analysts’ average estimate.
With COVID-19 cases soaring in the United States, the storage behavior demonstrated by consumers at the start of the pandemic could once again boost Walmart sales. The company also launched its Walmart + Membership Program in September, which offers free same-day delivery of groceries and some general products. With the intensification of the pandemic, this service could find many customers in the months to come.
Despite the strong earnings report, Walmart shares were down about 0.4% as of late morning Tuesday. The stock is still up around 28% year-to-date.
Home Depot’s booming sales continue
With travel and entertainment spending still deeply depressed due to the pandemic, consumers continue to spend heavily on home improvement projects. Home Depot reported 24.1% increase in comparable sales in the third quarter, driven by “the continued disproportionate demand for home renovation projects”.
Home Depot said total sales of $ 33.5 billion, up 23.2% year-over-year and $ 1.74 billion above the average analyst estimate. Earnings per share were $ 3.18, up from $ 2.53 in the prior year period and $ 0.15 better than analysts’ expectations.
As a sign that Home Depot believes this increased demand is here to stay, the company is shifting from temporary programs to increase employee compensation and benefits to permanent measures. Home Depot expects to spend about $ 1 billion on an annual basis on permanent improvements to the compensation of its frontline hourly workers.
It remains to be seen what will happen to home improvement sales once the pandemic is over, but for now, The Home Depot is experiencing historic demand levels. Home Depot shares were down around 3% on Tuesday morning, with the market apparently unimpressed by the company’s exceptional results. The stock is up about 24% this year.
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