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The Winners

While there are parts of the economy still struggling during this current crisis, there are also some big winners.

The obvious and most talked about winners are in the tech space. Apple, Amazon and Facebook all reported amazing quarters recently. The tech dominated Nasdaq continues to hit record highs as investors pile into that space.

The other set of winners, which get slightly less attention, are on the retail side.

Target, Walmart, Home Depot and Lowe's all recently reported earnings and they were all spectacular.

Target CEO Brian Cornell told CNBC that people have not been spending money on summer travel, and the dollars that would go towards vacations, has instead gone to spending more at stores, like Target. "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," Cornell told the cable network. The same commentary came out during Lowe's earnings report. Lowe's CEO Marvin Ellison spoke about people taking the cash they did not use for vacations, and instead, putting it to work on improving their home. "We’ve got tons of anecdotal information where someone was planning to take a vacation and now they’ve decided to remodel the kitchen, where they were planning to take a vacation and they decided to remodel their entire backyard to make it a place where they could spend more time," Ellison said during the earnings call last week. The commentary makes sense. People have been at home much more often this year because of the pandemic. Of course, they want to spruce up the place where they are increasingly spending more time.

These giant retailers also reported that the positive sales trends were true all across the United States. It's not just people in the northeast or southwest, but all over the country spending rose at retailers. "We saw in all of our top 40 markets, double-digit growth. And it's one of the most narrow performances we've seen by region, by market in quite some time," said Craig Menear, CEO at Home Depot. The CARES Act with enhanced unemployment benefits and the stimulus checks sent out to many Americans also helped. Walmart noted in its earnings call that customers were doing better financially than what would normally be expected during a recession. "We see a number of consumers who are feeling better about their personal finances, but the sentiment is a little lower than what they've been a year ago," said John Furner, CEO at Walmart.

There had been some concern that when the boosted unemployment stopped at the end of July, these retailers would take a hit. However, both Target and Home Depot were asked about that on their earnings call last week. Executives for both said they continued to see strong sales into the first weeks of August. As a long term investor, it's important to think about whether this trend will continue for a while going forward. The data indicates that there are many people still cautious and not willing to get on planes or go to restaurants. Without a vaccine or cure for the coronavirus, it is hard to imagine that the behavior will change soon.


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