The past several weeks have seen one glowing earnings report after another for retailers and eCommerce companies. In toys, Mattel and Hasbro both saw strong sales between April and June, and shoemakers Skechers and Crocs said they’ve seen increased demand for their products as consumers emerge from their homes.
It’s not all sunshine, though. Procter & Gamble on Friday (July 30) told investors and analysts that it expects $1.9 billion in increased costs over the next year as supply chains remain muddled and COVID-19 variants continue to spread across most of the U.S. and other parts of the world. And S&P Global Market Intelligence predicted last month that Nike could run out of Vietnamese sneakers if the pandemic continues to force factories in the country to shut down.
Perhaps most concerning, though, was Amazon’s miss of analysts’ expectations on Thursday. While attributed by company executives to consumers’ return to in-person shopping and other social activities, others saw it as a potential slowing of consumer spending overall amid renewed uncertainty about COVID-19. PYMNTS has reported that despite a 1 percent increase in household spending in June, economists are concerned about how long-term spending growth will hold up.
Still, if the past two years have shown anything, it’s the resiliency and adaptability of retailers. Most retailers have now heavily invested in digital capabilities and perhaps are better for it, putting them in a much better place to keep commerce flowing if consumers retreat to their homes or new COVID restrictions are put in place. For example, buy online, pickup in-store (BOPIS) is now practically assured at every retailer, and consumers have now come to expect an omnichannel shopping experience, with 92 percent having placed an online order recently according to PYMNTS research.
In fact, with the holiday season looming, an increase in digital could be a blessing for retailers who are currently struggling with an industry-wide labor shortage. More digital shoppers could lead to fewer in-store associates, alleviating some hiring woes — or at least limiting them to the logistical side.
Supply Chain Snags
After the past 18 months, retail executives are taking little for granted, especially when it comes to importing their products.
Children’s apparel retailer Carter’s, for example, is paying a premium to ship its products out of Asia using air freight as a shortage of shipping containers and delays at ports snarl global trade. And executives at Crocs, seeing a rebound in demand after years of being seen as a faux pas, said one of their key concerns is spikes of COVID-19 in Asia that could impact supply in coming quarters, as well as import issues.
“I would say there are many bottlenecks in the global logistics chain, whether it be Long Beach, whether it be rail out of Long Beach, whether it be availability of trucking,” Crocs CEO Andrew Rees told investors and analysts. “The list goes on.”
During a presentation to the media last week, Jack Kleinhenz, chief economist for the National Retail Federation (NRF), said despite some positive economic indicators and the National Bureau of Economic Research determining that the pandemic era recession ended in April 2020, “by no means has the economy fully recovered.” Unemployment was still at 5.9 percent as of June, and approximately 7 million fewer workers are on payrolls today than in February 2020.
“We are keeping a close eye on prices, we’re keeping a close eye on wages and household expectations of inflation as they relate to the current outlook for spending,” Kleinhenz said. He added that he expects prices to remain higher for several months as demand continues to outpace supply and logistics issues take time to iron out.
The Week Ahead
In the next several days, CVS Health, Wayfair, BigCommerce, Carvana and Simon Property Group will all report their quarterly earnings, giving an even clearer picture of several different pieces of retail and eCommerce sectors.
Though unlikely to paint a drastically different picture than the earnings seen in the past several weeks — CVS will likely have seen a boost from the spring’s increased vaccination rates — Simon could be noteworthy as the company owns several brands in conjunction with Authentic Brands Group, including Aeropostale, Forever 21 and Brooks Brothers, in addition to having some insight as a mall operator about foot traffic and consumer demand.
Wayfair and BigCommerce will also present more insight into eCommerce and expectations for the coming months, with Wayfair additionally giving a glimpse at whether the nesting trend is really over or whether it may be beginning a new chapter as guests are once again welcomed into peoples’ homes.