US retail sales seem 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 great 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 instigating 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 understand 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.