Retail dominated earnings calls over the past two weeks, offering an in-depth look at the latest from an industry that has experienced both booms and busts over the course of the COVID-19 pandemic.
Our team dove into the transcripts of more than two dozen major retailers — a snapshot that included everyone from Walmart, Target and Home Depot to AutoZone, TJX and Dollar Tree. Overall, initiatives related to COVID-19 are dominating their thoughts and actions, but most retail CEOs are still moving forward with long-term growth strategies. And, in many cases, the pandemic has accelerated what was already in motion.
For instance, the shift from brick-and-mortar retail to ecommerce has grown exponentially, as has demand for curbside pickup and same-day delivery. That served as a lifeline for those retailers that were not deemed essential and therefore not permitted to stay open — although in multiple cases, it was not enough to save a sinking ship. JCPenney, J.Crew and Neiman Marcus — all of which were struggling prior to the pandemic — are now facing existential crises. Meanwhile, those retailers that were deemed essential — think Walmart, Target, Lowe’s, Home Depot, Costco and Amazon — benefited from the initial wave of panic buying, hiring thousands to keep up with demand. Their digital agility also helped, enabling them to respond quickly to rapid-fire changes.
Let’s look at one example. In 2019, Target began converting its stores into digital fulfillment hubs. This made it easier for the company to move to a curbside pickup and same-day delivery model at the height of the pandemic.. Target also recently brought all of its software development in house, which has helped it move faster. “The ability of our operations to handle this unexpected acceleration has given us even stronger conviction that we have the right model,” Target COO John Mulligan said in a May 2020 earnings call. Back in January — even before COVID-19 had hit the U.S. — Target CIO Mike McNamara had said publicly, “By and large, that is all about technology, and you’ve got to be able to build that stuff yourself.”
While no one really knows what the future holds, I think those predicting the critical importance of digital and omnichannel strategies might be right. My 82-year-old mother is now shopping online, and that’s something I never thought I would see.
Below, we’ve compiled a snapshot of what retail CEOs have said in the past two weeks. . As more of the country begins to open up, we expect to learn even more about focus areas and priorities, and we will deliver that insight to you as often as we can. When it comes to executive engagement, it’s never been more important to understand what executives are thinking about and planning for. If you know what your target executives are thinking, especially during times of crisis, you can present viable solutions to their biggest problems, add value to your executive conversations and become a trusted advisor.
What They’re Saying
Pilot Company CEO Jimmy Haslam III
“We've all learned that we could do things faster than we thought. We've probably had too many projects going on, some of which were inconsequential. And so we need to move faster and we need to spend time on fewer, bigger projects.”
Burlington CEO Michael O’Sullivan
“We will pursue the key elements of [our] strategy with even greater focus and bigger than we had previously planned… in this situation we are likely to be faced with significant opportunity but also considerable uncertainty. The action implication for us, is to be even more off-priced, more flexible, leaner and more opportunistic.”
Dollar General CEO Todd Vasos
"We have hired over 50,000 people since mid-March, nearly double our normal hiring rate.... Our hiring efforts are continuing.”
Ulta Beauty CFO Scott Settersten
“Given the new operating environment, we plan to accelerate efforts to strengthen our fleet through relocations, negotiations with our landlord partners and potential store closures. And while we believe there's opportunity to open more stores and reach new guests, we are also evaluating our long-term store target in the U.S., given the acceleration we are experiencing in our e-commerce business.”
Target COO John Mulligan
"One thing we've observed about this crisis is that it is causing an acceleration in consumer trial and adoption of digital shopping. The ability of our operations to handle this unexpected acceleration has given us even stronger conviction that we have the right model and we have ample capacity to handle continued change in the future. Specifically, as part of our long-range plans at the beginning of 2020, our first quarter digital volumes weren't anticipated for another 3 years, but our operations accommodated that extra volume without any advanced planning … It was an extreme test of our model and our team, and both performed admirably in the face of the challenge.”
Advance Auto CEO Rom Greco
"Throughout the crisis, we prioritized initiatives that we believe will offer the potential for the best returns. We took every big initiative that we had... and we determined whether we were going to accelerate it, continue it, defer it or stop it altogether. And everything that we had was put through that lens.”
Walmart CFO Brett Biggs
“Customers are gravitating towards store pickup and delivery, driving record demand for these services, leading to triple-digit growth in U.S. ecommerce sales during peak periods. The strategic importance of providing multiple options for customers has never been clearer. We continue leaning in aggressively in key areas but also maintaining discipline. We’ve accelerated investments in omni-fulfillment solutions, quickly increased ship-from-store capabilities, hired a significant number of personal shoppers, expanded pick-up slots and launched express deliver, all within a matter of weeks. The number of customers trying pick-up and delivery has increased four times since March.”
AutoNation Chairman and CEO Michael Jackson
"This whole disruptive period with corona is an inflection point from which there’s no turning back. While there’s been a strategic trend towards digital and we certainly have invested in those capabilities, this is an accelerant.... And I think the bar has now been raised [so that] for any company that wants to perform in this marketplace ... you need first-class digital capability, you need a safe environment for your customers and a safe environment for your associates. That is the Holy Grail."
Foot Locker Chairman and CEO Dick Johnson
"Our team ... does a great job of assessing the risk involved with all of the malls, from the A plus malls to the F malls. And we certainly see that there is some risk coming out of this as the team evaluates each market. Part of the solution is ... moving off mall, if necessary. One of the things that we’ve learned over time is that when malls go away, the customer in those neighborhoods doesn’t go away.... Customers there want to shop, and they’re very engaged with us in the shopping product that we bring for them. So this may be a bit of an accelerant, but our team is certainly looking at places off mall where we have the opportunity to pivot.”
Burlington Stores CEO Michael O’Sullivan
“We started the year with inventory levels down 19%. This is a key element of our full potential strategy to run with leaner inventories. Given the level of uncertainty in the months ahead, we now plan to operate with even leaner inventory levels. This will not only provide more flexibility to respond to the sales trend, but it should also drive faster turns and lower markdowns ahead of planned sales… The action implication for us, is to be even more off-priced, more flexible, leaner and more opportunistic.”
Lowe’s CEO Marvin Ellison
“During this time of high levels of unemployment in our country, Lowe’s has hired over 100,000 store associates for the spring season. In addition, to assist other retailers and operate safely in this exceptionally challenging environment, we shared our best practices with the Retail Industry Leaders Association. In fact, the only competitive threat we’re focused on right now is the COVID-19 crisis.”
Trending right now
During this time of mind-blowingly rapid change, we’re committed to bringing you the latest trends we are seeing in the most recent batch of earnings calls reviewed by our team. Here are some trends we have noticed in the past two weeks:
- Accelerating digital initiatives, for those companies that were already heading down that path
- Focus on curbside pick-up, same-day delivery and by-appointment shopping as ways to adjust to the new normal
- Bankruptcy filings among those stores that were already struggling under the weight of debt and lagging sales
- Store consolidations and closures, as retailers seek to improve per-store profitability
- Leaner inventory, particularly among discount retailers with limited ecommerce presence
- Hiring, for those retailers deemed essential and hit with the wave of panic buying, which has now transitioned to buying items to make people feel more comfortable at home.
Your Next Steps
We all need to be aware that in some cases executive priorities are changing. In others, not so much — for now. Marketers should be focused on bringing the latest information as it develops to their account teams as it develops. Given that we employ a small army of really smart people to read and parse corporate earnings call transcripts all day long, we can help by feeding you the latest.
What do you do with this information? Do what you have always done — align and support. Here are the four questions you should try to answer about all of your top accounts:
- How has their strategy/priorities shifted post-COVID-19?
- What are they cutting?
- Where are they investing--or doubling down?
- What can you offer that supports their current focus?