It's no longer just WATCH. I am talking about what I have propounded for ages that the only retailers worth owning could be encompassed by the letters WATCH, as in Walmart (WMT) , Amazon (AMZN) , Target (TGT) , Costco (COST) , and Home Depot (HD) .
Now the acronym has played out perfectly. Walmart has crushed it both with grocery and with delivery. The pandemic seems almost created for Amazon. Target had the best quarter of any retailer because of its order online pick up at store and because of its Shipt delivery, and tremendous private label assortment. Costco, first to make you don masks, turned out to be the safest place to shop - wide aisles, excellent social discipline, and Home Depot crushed it, helped by appliance sales and good contractor traction.
But as almost of the retailers have reported, we have to point out there are so many new winners that could have staying power. Best Buy (BBY) , for example, was able to put up excellent numbers even when it was really only a pick up place for goods. Now it's roaring with the lowest prices and the best selection. This morning Dick's Sporting Goods (DKS) reported a staggering gain in e-commerce of 194%, again with curbside pick-up as well as 450 point gross margin improvement.
I would point out that since neither sporting goods nor appliances were deemed essential going into the pandemic, almost all small business competitors in the category got blown up. Talk about last man standing. That defines these two.
I know there have been people who have been skeptical of Lowe's (LOW) given how far behind it had fallen versus its age-old competitor, Home Depot (HD) . They aren't feeling that way anymore. Marvin Ellison, late of Home Depot, has done an amazing job turning the ship around, making the stores cleaner, more friendlier and more welcoming to contractors. Now he has turned his attention toward the dotcom side - yeah, this company had been totally uninvested in technology, and he's going to give Home Depot a good run there, too. Ellison tells me his stores in the Southeast are bracing themselves to help customers whose lives could be torn asunder by the upcoming Hurricane Laura. I think it's still at a good price.
The dollar stores never skipped a beat. I think they have run a great deal but they can run a great deal more.
Finally, Urban Outfitters (URBN) , miraculously, pivoted literally intra-quarter and, through sheer brain power, put through double digit gains. Truly impressive, but the stock's run in the wake of the numbers pretty much captures the good news.
Not all of retail is working. Once again I point out that neither Kohl's (KSS) nor Nordstrom (JWN) really offer anything that makes we want to buy them. Both were trumpeting their cash positions for heaven's sake. Nordstrom, in particular, was disappointing across all divisions and on-line as well as off-line. It takes a lot to be that bad, even for a mall retailer. I struggle over the raison d'etre for both of them. If they didn't exist would it change your life unless you worked there - I say that as someone whose father worked for Gimbel's, and mom worked for Lit's, two long forgotten chains that used to be kings of Philly.
Going into this quarter my mantra had been that you either had to be off-line with bargain prices or on-line. Otherwise forget about it. This was the quarter where off-line at bargain prices, stopped working as TJX (TJX) was the best chit in that game and it missed terribly. Trouble with getting right merchandise. No dotcom to speak of. A real disappointment and we had to sell some for my charitable trust. Only Ollie's (OLLI) seems to come through the off-price brick and mortar gauntlet with flying colors.
I say, save it. I don't' want a break up, I want growth. You should, too.