Whatâs Going On Here?One-time American sweetheart Loweâs reported worse-than-expected quarterly earnings on Wednesday, and investors ditched the home improvement retailerâs shares. What Does This Mean?Sure, Loweâs sales were better than analysts expected, thanks to twice as many online sales as the same time last year. But its profits â weighed down by store refurbishments and ecommerce investments â werenât able to live up to estimates. Workforce expenses were a biggy too: Loweâs has been paying its staff higher wages during the pandemic, and the move's cost it $1 billion in the first nine months of the year. Still, at least that's not Home Depot money: Loweâs DIY rival reported costs closer to $2 billion on Tuesday. Why Should I Care?For markets: Home isnât necessarily where the heart is.
Loweâs shares took off after the coronavirus outbreak. Thatâs mostly because its status as an âessential retailerâ allowed the company to keep its doors open during lockdown, and because it hoovered up cash that wouldâve been for holidays instead of home improvements. But with its sales growth slipping from summer peaks, the question for investors now is just how sustainable those gains will be. Maybe Loweâs ought to follow Targetâs example: the discount retailer reported an increase in its market share on Wednesday, which should set it up for success when the pandemicâs behind us.
The bigger picture: Tough lux.
Shopping habits are changing left, right, and center, but one of the most notable shifts is in luxury spending. Chinaâs now set to become the biggest luxury market by 2025 according to consultancy Bain, with the countryâs wealthiest traveling less and splurging more on home turf (tweet this). At least that gives luxury retailers something to look forward to after a terrible 2020: this year wonât just see the sectorâs first drop in sales since 2009, itâll see the biggest drop in sales ever â and things arenât expected to get back to pre-pandemic levels till 2023. | 