Which retailers and restaurants have been hit the hardest by the COVID- 19 pandemic, and what does that portend for the future? To find out, I took a look at the latest quarterly financial reports, comparing percent change in sales versus the prior year for stores or locations which have been open for at least a year.
It’s clear that retailers selling food and other essentials continue to report significant growth, while most restaurants – but not all – still struggle to recover. But the big story here is the continued skyrocketing of online sales.
Amazon’s net sales and net income doubled in Q2 2020 – net sales grew 40% versus 20% in the year-ago quarter and net income reached $5.2 billion, while online grocery sales tripled.
At the same time, many brick and mortar retailers delivered staggering e-commerce growth during that quarter with BJ’s reporting a 300% increase in digitally enabled sales; Target’s digital same-store-sales were up 195%; Ahold Delhaize with a net online sales gain of 127%; Kroger’s digital sales grew 127% and Walmart’s e-commerce sales grew 97%. Clearly, the growth of contact-free shopping was rapidly accelerated during the pandemic and the U.S. Census Bureau reported Q2 2020 U.S. retail e-commerce sales growth tripled (growing 44.5% versus 13.8% in the year ago quarter) and share of total retail sales was up almost 50 percent to 16.1%.
Now what? The competitive arena has intensified as restaurants re-open with fewer seats and, in some cases, with shorter hours. Both restaurants and food retailers look to safely expand operations curtailed during the pandemic.
It’s clear that online grocery sales will continue to climb. But unemployment levels continue to pose a challenge, especially since some companies are not rehiring all their furloughed workers. They’re learning to survive with fewer employees. Will brick and mortar retailers selling food continue to have the upper hand and keep a large chunk of the $240 billion sales decline in 2020 restaurant and bar sales projected by the National Restaurant Association?
Across large publicly traded chains selling fast-moving consumer goods within the dollar, drug, hardware/ home improvement, mass merchandiser, supermarket and warehouse/club retail channels, the hardware/home improvement retail channel was the big winner. With more at-home time during the crisis, taking care of our homes and apartments clearly mattered as Lowe’s and Home Depot posted second quarter gains of 35% and 25%, respectively.
Other chains with big gains highlight the importance of at-home meals as well as consumer desire for contact- free shopping via click and collect and home delivery options. Albertsons led the way with growth of just under 27% in the first quarter, followed by Target (Q2 +24%), BJ’s (Q2 +24%), Ahold-Delhaize (Q2 +21%), Publix (Q2 +20%), Dollar General (Q2 +19%), and Kroger (Q2 +15%). (Publix is employee-owned and not publicly traded, but it releases quarterly financial performance metrics.)
Dollar Tree posted Q2 growth of 7%, with its Dollar Tree format up by just 3% while its Family Dollar format (with a greater assortment of food and other essentials) grew by nearly 12%. Dollar General saw its Q2 growth up by 19%.
In the drug channel, Walgreen’s same-store-sales were up by 3% in FY Q3 (ended 5/31/2020) – a decline from the 4% gain reported in the year-ago quarter. The company cited store closures during the COVID-19 crisis as a driver of the decline. CVS with a 2% increase in Q2 2020 compared to a gain of 4% in the same period in 2019. Rite Aid’s Q2 2020 same-store-sales grew 3.5%.
Most restaurants continue to struggle, particularly those with mostly dine-in locations. Among large quick-serve restaurants (QSRs), Popeye’s (+29%), Papa John’s (+28%) and Domino’s (+16%) yielded superior second quarter results, while KFC grew 7% and Pizza Hut grew 5%. The success of Popeye’s new chicken sandwich – along with QSRs’ serving family meals with home delivery or store pick-up options – were a big hit.
Other big QSR chains struggled including Wendy’s (-4%), McDonald’s (-9%), Chipotle (-10%) and Burger King (-10%). However, with more and more stores reopening, many chains have been reporting how their stores have been yielding better performance in the weeks following the second quarter.
High-end and casual dine-in restaurant chains incurred extreme pain during the crisis. At the high-end, Darden’s fine dining chains (The Capital Grille and Eddie V’s) experienced a 39% drop in same-store-sales for their fiscal quarter ended August 30. Other more upscale Darden chains also fell 39%, while Darden chains with broader appeal performed better, but still were down sharply (Olive Garden -28% and Longhorn Steakhouse -18%). With the benefit of more weeks with increased reopening of stores, Darden fared somewhat better than Bloomin’ Brands. Bloomin’ Brands two more upscale chains suffered the most as Bonefish Grill fell 57% and Fleming’s Prime Steakhouse declined by 56%. The company’s Carrabba’s Italian Grill dropped 37% and Outback Steakhouse fell 33%.
Publicly traded casual dine-in chains were not spared, with breakfast chains hit hard. IHOP fell 59% and Denny’s was down 56%. With greater focus on lunch and dinner meals, Applebee’s (-49%) and Olive Garden (-39%) performed slightly better.
Retail insights thought leader Todd Hale ([email protected]) is the former senior vp of consumer and shopper insights at Nielsen. He is principal of Cincinnati-based Todd Hale LLC.