Retail booms in COVID
Tippets by Taps #145: Retail's blowout quarter, DoorDash grocery, Apple $2T, ancient beds and more. Enjoy!
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This past week Walmart, Target, and Home Depot posted massive earnings, with headlines like “Target reports a monster quarter”, “Walmart second-quarter results crush estimates” and “Home Depot Finds a Home in Pandemic” underscoring the market’s surprise. The numbers illustrated common themes that we’ve discussed a few times: COVID is a trend accelerator, and there is a distinct advantage for large, well-capitalized companies to further separate themselves from the competition.
Target added 10 million new online customers, with sales online and at stores open for at least a year growing by 24.3%, the highest ever
Walmart’s e-commerce business grew by 97%, helped by online grocery ordering; same-store sales grew by 9.3% in the second quarter
Home Depot’s sales jumped by 23%, and profits jumped 25%, despite spending to keep employees and customers safe, thanks to digital initiatives rolled out in 2018 that helped with inventory management and supply chain
The pandemic will continue to accrue value to those companies that have the balance sheet to withstand near-term revenue hits, the right technology and tooling to adapt quickly to changing market conditions, and a willingness and capacity to make medium- to long-term business decisions amidst COVID instead of being paralyzed by uncertainty.
A common theme among the reporting was how off Wall Street analysts were in their estimates.
In the April quarter, Walmart’s comparable U.S. sales grew 10% and Wall Street was expecting growth of 5.9% for the July quarter, according to estimates compiled by FactSet.
[Target’s] total revenue rose 24.7% to $23 billion from $18.42 billion a year prior, beating analysts' expectations of $20.09 billion.
‘I’ve never seen a quarter like this’—Analyst on Home Depot’s comparable sales surging 23.4%
I’m surprised at the surprise.
This week during Target CEO Brian Cornell said what I thought was the obvious: “In the pandemic, we're not going to restaurants, we're not going to movies. Those traditional summer trips have been canceled. We're not on planes. We're not spending dollars on lodging, so many of those dollars have been redirected into retail." Americans spend almost $1 trillion a year on travel. This year travel isn’t possible and the money has to go somewhere and it’s certainly not going to be under floorboards.
The role of a Wall Street analyst is fascinating and integral. They provide business analysis and price targets for companies that are used for everything from capital raises to M&A transactions. In my day as an investment banker I remember spreading comps, painstakingly navigating Factset trying to get the right set of analyst data points that justified an increase or decrease in value of a company depending on which side of the table I was on. Analyst research has the ability to meaningfully impact a company’s price per share, adding or subtracting millions (or billions) off a company’s market cap. The crazy part? When analysts miss wildly in their estimates as they did with these retailers, the response is a collective ¯\_(ツ)_/¯ and everyone moves on with no negative consequences. Not a bad gig if you can get it!
DoorDash is launching a grocery delivery service
DoorDash is getting into the grocery game. The company announced earlier this week that they have partnered with grocers around the country to bring you your groceries. The difference in the DoorDash promise (compared to say, Instacart or Amazon Prime Now)? They will get you your groceries within the hour.
The restaurant delivery platform is partnering with regional grocers across the country, including Smart & Final, Meijer and Fresh Thyme, to offer on-demand grocery delivery. In upcoming weeks, D'agostino, Gristedes and Hy-Vee will join the platform. Other chains, including Wegmans, Gelson's and others, will allow customers to order prepared food through the app.
As the company prepares to go public in the fourth quarter of this year, the move into a new category makes sense. Grocers have demonstrated amazing resilience during COVID. Online grocery buying has surged this year and is only projected to go higher. Combining grocery and restaurant onto a single app helps differentiate, and creates more potential touchpoints for the user which helps support the overall delivery network. I am curious to see both how the company updates its interface to accommodate the nuance of grocery and whether the company will see enough early value from grocery to impact its IPO.
Apple is now a $2 trillion company
Apple continues to defy the laws of gravity. This week the company crossed the $2T mark, adding over $1T in market cap in less than two years (this graphic by the NYT for the $1T was awesome). Nothing really to add other than a tip of the cap.
Microsoft + TikTok = nfw
Right now everyone with any kind of balance sheet and a pulse seems to be in on buying TikTok. Microsoft. Twitter. Even Oracle is interested in it. With the US government threatening to shut down the service due to national security concerns while simultaneously acting as investment banker brokering a sale, this story is wild.
I found this piece by Scott Galloway highly entertaining and informative (as I do a lot of things by him).
Expect several other investor relations departments to leak to the WSJ/NYT that they are in discussions to acquire TikTok, as it’s easier to create billions in value by calling the WSJ and going on background than by, you know, actually creating value.
Microsoft added Boeing to its market cap ($95 billion) on the notion that the fastest-growing social platform in the world would be served up on a platter, under the specter of a national ban yielding Satya yuge leverage…The president telling Satya to acquire TikTok is similar to Joel Glazer calling Tom Brady from a Florida day spa and demanding he pass the ball more to Gronkowski. Yeah, thanks for the call.
If you believe the Chinese will be bullied into selling a global internet asset on the cheap, you should take up boxing.
People slept on comfy grass beds 200,000 years ago
Apparently we’ve have been obsessing with our beds since the beginning of humanity. Archaeologists recently discovered bedding dating back 200,000 years, pushing the date of the earliest-recorded bedspread back by over 100,000 years. This finding adds a unique dimension to our understanding of the human experience and the desired creature comforts that persist today.
The Border Cave find shows that people have been making comfy sleeping pallets out of grass for at least 200,000 years—nearly as long as there have been Homo sapiens in the world.
Besides being much softer than the cave floor, these ancient beds were probably surprisingly clean. Burning dirty bedding would have helped cut down on problems with bedbugs, lice, and fleas, not to mention unpleasant smells. Wadley and her colleagues suggest that people at Border Cave may even have raked some extra ashes in from nearby hearths “to create a clean, odor-controlled base for bedding.”
Clean beds, changing the ‘covers’, and ensuring a good bedroom odor date back to the beginning of our species. Apparently, so does working in bed.
Wadley and her colleagues also found stone flakes and other debris from toolmaking, which means people probably also used the comfy piles of grass as a soft place to sit while working on a new stone tool.
As French journalist Jean-Baptiste Alphonse Karr "the more things change, the more they stay the same.”
Oh, great: NASA says an asteroid is headed our way right before Election Day
Before anyone gets too nervous, let me level-set:
Asteroid 2018VP1 is very small, approximately 6.5 feet, and poses no threat to Earth. If it were to enter our planet's atmosphere, it would disintegrate due to its extremely small size," NASA said in a statement. "NASA has been directed by Congress to discover 90% of the near-Earth asteroids larger than 140 meters (459 feet) in size and reports on asteroids of any size."
NASA says that, "based on 21 observations spanning 12.968 days," the agency has determined the asteroid probably -- phew! -- won't have a deep impact, let alone bring Armageddon.
The chance of it hitting us is just 0.41%, data show.
That said, it’s been one of those years so might as well add asteroid to the list of “Are you freaking kidding me!”:
Global pandemic
Political unrest
Heatwaves
Raging fires and terrible air quality
Asteroid
What did I miss?
Quote I’m thinking about: “The world is full of magical things, patiently waiting for our senses to grow sharper.” – W.B. Yeats
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