Walmart and Target CEOs say uncertainty looms even as sales skyrocket
- Business is booming for
Walmartand Target. But both retailers warned of uncertainty heading into the critical holiday shopping season.
- "There's just a lot of uncertainty right now, and so much variance in how customers are feeling about their situation," Walmart CEO Doug McMillon said Tuesday.
- Meanwhile Target CEO Brian Cornell told CNBC, "There's just so much uncertainty today — what's going to happen with the pandemic, what's happening with flu season — as we go into the fall, questions about the economy and the new stimulus, do we go back to school and back to college."
Walmart and Target reported blowout quarterly results this week, with some sales metrics surging to record highs as shoppers spent extra funds from government stimulus checks and cancelled vacations on groceries and household goods.
Walmart's digital sales nearly doubled from a year earlier and Target's nearly tripled. The companies' same-store sales climbed 9% and 10.9%, respectively. When combined, Target's same-store sales in stores and online rose by 24% — an all-time high.
Despite this strong growth, the chief executives of both Walmart and Target declined to provide guidance on the remainder of the year, citing uncertainty around stimulus funding and the critical holiday quarter, when retailers in general tend to generate about 30% of their annual sales.
"There's just a lot of uncertainty right now, and so much variance in how customers are feeling about their situation, and this decision that the government's got to make about Phase 4 investments is an important one," Walmart CEO Doug McMillon said Tuesday, referring to the federal government's potential passage of new stimulus funding.
McMillon said stimulus money had the biggest impact on Walmart's business in the second quarter, followed by people eating more meals at home and spending more time at home in general, which drove expenditures on groceries, office equipment, sporting goods, and other household items.
The impact of stimulus funding on Walmart's sales was so strong that the company saw shopper spending accelerate as funds were paid out, then taper off and normalize as those funds dried up, executives said.
Target CEO Brian Cornell meanwhile credited cancelled vacations, travel, and restaurant spending as a primary driver behind the retailer's strong quarter.
Cornell also cited the importance of additional stimulus funding, however, to help provide consumers with more certainty heading into the fall.
"It's very important the House and Senate come together and put forward a new stimulus plan," he told CNBC's Squawk Box on Wednesday. "There's just so much uncertainty today — what's going to happen with the pandemic, what's happening with flu season — as we go into the fall, questions about the economy and the new stimulus, do we go back to school and back to college."
"So we better make sure we're adjusting to this environment and adjusting each and every week," he said. "It's hard to understand what's going to happen next week, let alone three or four months from now."
Walmart and Target share few details on their expectations for holiday spending
Walmart provided some color on the back-to-school season, but offered no guidance on expectations for holiday spending.
McMillon said the back-to-school season is "off to a slower start than usual given the uncertainty around the timing of students physically returning to school."
"As a result, we expect the season to be choppy and come later than normal," he said.
He said Walmart is focused more on its near-term business than the holidays this year.
"We kind of smile when we think about the holiday because while we had to plan some aspects of the holiday, we're managing near term much more actively than we would in a different environment," McMillon said.
Walmart CFO Brett Biggs said the company is thinking through how each holiday — such as Halloween, Thanksgiving, and Christmas — may change.
"With schools, we're still learning day to day which schools are open or planning to open, and I think every one of the holidays that will be experienced over the next couple months will have to decide as we get closer," Biggs said.
Target, meanwhile, offered some details around its plans for holiday sales, saying it would launch its steepest discounts in October, which is earlier than usual, to help better manage crowding in stores.
"Our research tells us that guests still want to celebrate seasons and holidays," Cornell said.
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