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US Earnings: Emerging New Trends Further Disrupt U.S. Retail Sector


Senior Market Analyst at Interactive Brokers

Interactive Brokers’ senior market analyst Steven Levine offers some insights into the ever-evolving retail landscape ahead of retailers’ earnings in February, including how new digital trends are further disrupting the industry. With customer engagement at the core, companies such as Macy’s, Bed, Bath & Beyond, Home Depot, Best Buy, Walmart and Wayfair have generally focused on transforming their business models, while increasingly competing against the stimulus provided by the on-line experience.

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Produced on February 7, 2020

Video Script:

With earnings season in full swing, investors will likely be eyeing retailers’ financial results for further signs of health in the domestic economy. They will also likely be paying attention to certain new developments that have either helped to boost, or blunt, customer engagement. The relatively recent rise in on-line shopping, for example, has certainly threatened traditional retailers’ brick-and-mortar business models, and has generally compelled companies in the consumer discretionary sector to develop, or continuously improve, not only their digital presence and overall operational strategy, but also their ability to provide enough in-store stimulus to rival the very impetus to decide to shop online. In fact, it seems many stores have all but given-in to the rising tide of on-line consumerism.

This appears in part to be highlighted by shrinking levels of physical inventory, perhaps in anticipation of lower foot traffic, while workers have become increasingly focused on arranging on-line orders for, and on-behalf of, their customers. Other anecdotal evidence suggests that it is not unusual to find abandoned registers and skeletal staff with less-than-ideal product expertise roaming the floors among larger retailers such as Bed, Bath & Beyond, and Macy’s. The general lack of in-store enthusiasm at Macy’s, for example, is likely having an adverse impact on the store’s brand in general, contributing to its recent dismal sales performance, and prompting its latest restructuring, which is set to result in a significant number of store closures, as well as a material reduction of headcount. 

While market participants widely expect on-line user growth to continue to spike, the increasing use of data analytics, or ‘Big Data’, appears to be helping to create virtual environments with more nuanced, user-specific shopping experiences. Nelly N’yehm-bi, a researcher at MRP, pointed out, for example, that the reach on social media platforms such as Facebook, Instagram, YouTube, Pinterest and others, appears to be reaching levels where social commerce – the act of selling products within a social network – “will bring even more disruption to the retail process than e-commerce did.” Meanwhile, internet-based social platform Pinterest and retailer Wayfair have each turned towards using augmented reality-related tools to help shoppers better approximate how physical products may look and feel once delivered from the digital realm.

Against this backdrop, many traditional, physical stores such as Home Depot and Best Buy have been centered on providing their customers with choose-your-own adventure-type options, including on-line order and delivery, store pick-up, or an end-to-end, in-store shopping experience. Investors are set to receive several earnings releases from the retail sector toward the end of February, including from Walmart, Macy’s, Home Depot, Lowe’s, Best Buy and Wayfair.

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more. I’m Steven Levine, with Interactive Brokers.

Disclosure: Interactive Brokers

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