In this episode of Industry Focus: Consumer Goods, Emily Flippen and The Motley Fool contributor Dan Kline discuss the latest earning reports from some big retailers in the consumer goods space. They talk about how these companies are spending money on mitigating the effects of COVID-19 and improving their customers' omnichannel experience. They also provide a breakdown of retailers' financial and sales numbers and take a look at some new partnerships, subscription services in the space, and much more.
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This video was recorded on Aug. 18, 2020.
Emily Flippen: Welcome to Industry Focus. It's Tuesday, Aug. 18th, and I'm your host Emily Flippen. Today, I am joined by Motley Fool contributor Dan Kline, and we're going to discuss some big consumer goods earnings, that's Walmart (WMT 0.25%), Home Depot (HD 1.50%), and Kohl's (KSS +3.46%). Dan, thanks for joining.
Dan Kline: Thanks for having me, and glad we get to talk about something a little bit happy. How many bankruptcy shows [laughs] have we done? I think I was actually mapping out another bankruptcy show, you know, when we saw, oh, my God! There's earnings this week, and it's companies that are going to do well. I am not so sure in the case of two of these three companies that I knew they would do this well.
Flippen: Yeah, it's rare that we have the opportunity here, for our consumer goods-focused show, to talk about something really positive. So, I'm excited [laughs] that today, we'll at least put a positive spin on the news we have coming out. Although, it's really hard to paint any of this news in a negative light, I think Kohl's probably warrants a discussion, but let's start out with, probably, the one that we knew was going to be great, the most obvious one, and that's Home Depot.
And the reason why I say it's obvious is because, earlier this week, The Wall Street Journal released an article highlighting what a boon the pandemic has been to Home Depot's traffic. They have data from Unacast that suggested traffic to Home Depot stores since April has consistently run at least 35% above last year's. So it's natural to assume that that would lend itself to a pretty strong quarter. Is that we saw, Dan?
Kline: Yeah, there's not a lot of window-shopping during a pandemic. If there's foot traffic, it results in sales. Let me go through some of the numbers. They had sales of $38.1 billion for the second quarter; that is a 23.4% increase, that's astounding. Comp sales in the U.S. were up 25%; that's even better. Net earnings were $4.3 billion, or $4.02 per diluted share; that's up from $3.5 billion, or $3.17 per diluted share.
Why is the increase important? The increase is important because they're spending a ton of money on mitigating COVID-19, on taking care of employees, on extra cleaning. In the quarter, they spent $480 million in additional benefits for associates, including weekly bonuses for hourly associates; that's workers, employees in stores and distribution centers. Year to date the company has spent approximately $1.3 billion on enhanced pay and benefits in response to COVID-19. Emily, this is stunning; like, these are good numbers. They also said that they've paid a record amount of money in their profit-sharing program, and their digital sales increased 100%, and about 60% of those times they offered to pick up the orders in the store.
Emily, are that many people planting gardens and painting walls? Like, these numbers are through-the-roof astounding.
Flippen: Normally, I would say, well, it has to be all the pro sales here, right? But the reality is, and management said this on their call, is that it is truly what they call DIY sales. These are your local person, who to your point, is just fixing a wall, building a garden, doing some home improvement that they've otherwise put off that this pandemic has allowed them to do. So, this is very much organic growth in the sense that this is fueled by your layman visiting Home Depot; again, going back to that foot traffic.
But you mentioned sales in their digital platforms were up 100%. Home Depot has been one of the businesses that has been really resilient against the expansion of online sales, i.e., Amazon hasn't disrupted Home Depot's business. I wonder if Home Depot is just disrupting itself at this point? They're improving -- I steal the term from you, really -- their omnichannel experience here, encouraging people to do things like order online then pick up in stores if they can't get it for delivery. And this is really innovative stuff.
Kline: Yeah. And I'm also going to point out, Emily, that 60% pickup number meant that a lot of people use the convenience of the app as a way to minimize their time in the store; that's very smart during a pandemic, but here's why that's important and theoretically something that builds for Home Depot. Once they have your info, they can market to you, they know, hey, Emily just bought paint for her living room, maybe we should start marketing her appliances because she already painted her living room, maybe she needs exterior paint, whatever it is, they can offer you coupons, they can find ways to bring you into the store. You're in there, hey, we can reach out to you for basically free system.
And you know that you can order on their website. Once you've put your credit card in somewhere, that means you're likely to become a customer there more often. So, that transformation is more important and more sustainable than a bunch of people being stuck at home and saying, now we're going to plant a garden, now we're going to paint the bedroom, because we're not always going to be stuck at home. And at some point, we're going to be done with home improvements. Yeah, I've spent a reasonable amount of money during the pandemic doing home improvements on our vacation place. There was stuff I wanted to get done, it was always occupied, it was difficult to get done. We actually bought most of what we bought from Lowe's, but it is good for these companies. These are going to be really difficult comps next year, but on the profitability side, if they don't have all these added expenses, I'm going to guess they don't hit these numbers next year, but that they're higher than they were a year ago and they're more profitable. So, this is a really good business case for the Home Depot.
And as you mentioned pro sales, construction will come back. And there is a lot of home construction going on right now, some of which would be done by the smaller-time contractors that Home Depot goes after. A lot of it; I'm not sure, like, Pulte Brothers is pulling up to Home Depot and buying stuff, they're probably buying direct from many of their suppliers.
Flippen: Yeah, I'm happy you pointed out the comp sales, because as great as this quarter is, I agree with you that probably this time next year it's going to be really challenging for them to beat the numbers that -- you know, ideally they will be recording their quarter next year to the quarter that exists this year. So, when we talk about comp sales, that's really what it means, with how great this past quarter has been, it will be hard to beat that next year.
But what I think is really interesting is that there's been a lot of news in Home Depot around their performance, but the costs associated with COVID, it has hit their bottom line. And a lot of that has been employee-based compensation, whether that's bonuses, time off, stock compensation. But they have spinout money to really invest into this omnichannel experience. So, part of the things that they did this quarter was actually changing the scale and flexibility of their supply chain network. They changed what was essentially a Market Delivery Center, what they call an MDC, to a Direct Fulfillment Center, a DFC, I suppose. Which really just focused on delivering to their online orders. That's a one-time expense, right? I mean, ultimately, they're just trying to meet the demand that they're seeing online, but if that demand stays, if people who are becoming accustomed for purchasing online do that in the future, then they won't need to reconvert that center, that conversion has already taken place. So, it's entirely possible that a lot of these expenses that we're seeing for COVID are not a new normal expense for Home Depot, but rather a one-time expense to accelerate a transition that is already happening.
Kline: Yeah. And some of these purchases -- so let's say, Emily, you decide you're going to paint your living room over the weekend. Do you really want to drive to Home Depot to pick up paint brushes and paint, or would it be easier to just place that order and have it delivered, or easier to place the order and go pick it up curbside, even if there isn't a pandemic? Because Home Depot is a gigantic store, it's not easy to find things. Having them package your order for you is a benefit. So, will there be some pushback? Yeah, after the pandemic some people that were buying things online, if you're a do-it-yourself person, going to Home Depot for you is like going to a bookstore for me, I understand that you want to browse, you want to get ideas. That part of the business will move back, but this is pulling forward a lot of digital demand. And it forced them to adjust their supply chain on the fly. We saw a lot of big players, including the next company we're going to talk about, Walmart, do that. And it wasn't easy. There were bumps. We saw even Amazon had some supply issues in the early days of this, but once you, sort of, build up that muscle, you have a lot of ability to be flexible, and Home Depot had to do it and they came through it with flying colors.
Flippen: And that's a good place to leave it off, but I'm not going to. [laughs] I'm going to ask you one more question here. Sorry, not to completely hammer this point home, but as we're talking, I'm seeing some comments coming and talking about how Home Depot is, really, an Amazon-proof company. I think I agree with that, but it has me thinking here, would you call Home Depot a recession-proof company too?
I'll tell you what, my first instinct is, of course not. We see people spending money on their homes, discretionary income, all of these things fall when the economy does poorly, when the amount of money people make falls, so does, theoretically, Home Depot sales. But despite unemployment being at all-time highs, Home Depot sales are at all-time highs. It, kind of, doesn't make sense to me.
Kline: I don't know how sustainable it is. And some of it was based on people still getting the enhanced unemployment and basically being stuck at home with nothing to do. And, look, painting your living room costs money, but it's not that expensive and it brings value, it might also bring you joy to be in a nicer painted room. And that's important right now. I do also think some of this is gardening, some of this is people who are worried about the food supply which was early in the pandemic something that got written about, I think, a little bit overplayed. When you go to the grocery store and they only have 60% of the meat choice, but they still have four different types of ground beef, that's not really, you know, like, being out of, like, pork shoulder for a week was not as big a problem.
But that said, some people said, you know what, I'm bored, I'm going to try my hand at gardening, maybe this will give me some hedge against it. And, oh, hey, I like gardening and now I want better supplies, I want more stuff. I think that was a part of this.
There was also a run on appliance sales, if your refrigerator/freezer breaks, you have to get a new one, a pandemic or no pandemic, broke or not broke, you have to find a way to do that. I ordered a new refrigerator/freezer from Lowe's during the pandemic, it still hasn't arrived, so I have no idea if I've purchased one. I've given them the money, but good luck getting through to customer service, as we've talked about on previous episodes.
But that said, there are a lot of parts of this business that are recession-proof. If things are going badly, you may have to sell your home. If you sell your home, you're going to repair minor things, you're going to do paint touch-ups. It's not fully depression-proof, but it definitely has some protection.
Flippen: And we're going to move on here to Walmart, but I like that you highlighted the gardening, because while this is not a company we're going to dive into today, if anyone follows this company, Scotts Miracle-Gro, had a crazy quarter last quarter, declaring a special dividend. All because, while their Hawthorne division did well, it was mostly because people were just gardening more; typically, what is normally a really slow-growing business, grows at the rate of about GDP, which is having a historically [laughs] insane quarter, as people stuck at home decided, hey, maybe I should plant something. So, I'm not surprised to see that showing up here in Home Depot, either.
Kline: People are planning things; people are baking bread. But as we talk about Walmart, you asked, is Home Depot recession-proof? I am going to argue that Walmart is, because you have to eat, you have to wear something. The rules of society [laughs] say, clothes --
Flippen: Well, I agree with the former, the latter is debatable. [laughs]
Kline: OK. The rules here on Motley Fool Live are, you have to wear something. The rules out in public are generally, you have to wear something. Though, I do live in West Palm Beach, Florida, it's not a strict requirement [laughs] if you -- the Starbucks I often sit at will have people on their way to the beach that are not wearing that much, but in general, Walmart is a recession-proof company.
I'm going to go through some of the numbers. Total revenue came in at $137.7 billion, that's up $7.4 billion or 5.6%. Consolidated operating income was $6.1 billion, up 8.5%. Adjusted operating income in constant currency increased 18.6%, led by strength across all operating segments, including significantly lower losses in Walmart U.S. e-commerce. I would not have predicted that they were still losing money in e-commerce, but that is likely supply chain expenses. U.S. comp sales were up 9.3%, led by strength in general, merchandise and food. People were also doing more outside, spending on computers and TVs; that makes sense, we're watching a lot of TV, our kids are stuck on the computers for school, and cooking more at home. Earnings came in at $1.56 per share; that's $0.31 higher than expected.
And, Emily, this one is amazing. U.S. e-commerce sales grew 97%, with strong results across all channels. Wow! Your thoughts?
Flippen: Well, the first thought that comes to mind is Shopify. When I heard about that e-commerce channel, they added Shopify as an e-commerce partner. This is something that Walmart has been investing heavily into. And I'm not surprised to see their quarter be a strong quarter, right, for the general merchandise, for their food; this is expected. And we can honestly have the same conversation we just had about Home Depot about Walmart. Replace a few words and it would be the same story. But what I really want to take away here is, for me at least, Walmart+, and that's not the official name of whatever this ends up being. But essentially, it's the Walmart Amazon Prime, you know, it's a subscription. And they said that they started testing it, in the earnings call, at the end of last year. And they really just use it for grocery and consumable delivery. So, really building off of that e-commerce presence.
But the management, you know, they didn't provide a ton of color, did provide a little bit more color, essentially, they said, we've proven this, we think this is going to be successful for us. Our breadth, our availability, our scale makes us, in our eyes, competitive for a premium subscription offering. While we're not quite ready to launch and we'll give more information at launch, we're going to tell you that we are, in fact, moving forward with this. Which backs up a lot of the articles that we saw coming out over the past month or so.
So, building on what was a really strong quarter for Walmart, do you think this is a good use of money, do you think a premium Walmart subscription will succeed?
Kline: So, let me assume that's going to be based around grocery delivery or same-day delivery, in general. And I do think there has been a tidal switch; not that we're going to stop going to grocery stores, because I've enjoyed being able to go pick my own items and get back into a Whole Foods, get back into a Publix, decide what I'm going to make for dinner on a day-by-day basis, not that I do that every day. But that said, I've always been an Instacart customer, and when I'm busy I place an order, or if I'm sitting at home and I don't have time to get lunch, I might place a Whole Foods order, so I could tack on some sushi or whatever it is I want for lunch. They often screw that up and you get not exactly what you want, which can be a problem, but that said, I do think more people have adopted that. And Walmart has the potential to be a player. So, if they're going to charge $49.99, and I get same-day, two-hour grocery delivery service and that's less than half the price of Instacart, there is value there.
Target (TGT 0.66%) also does this as well, and can compete, and they offer it for less money, though, I don't know if there's a Shipt subscription or you always pay per time. But that said, this is a crowded space, I actually think Walmart would be better off staying with the $4.99 per order or $2.99 per order. I'm not against them offering this, I just don't think it's a game changer, I think it's a person who realizes, hey, I order from Walmart twice a week, why don't I just pay for this, because it'll be cheaper. I think that ship has sailed. When they got rid of this, the same offer when they bought Jet.com and said we're going to do two-day shipping for free, as long as you spend $35. That was the move. Going back to some sort of premium service, even if it's, look, we'll deliver you anything in a Walmart same day, I think that's a niche, I think it's a nice little product offering, but it's not a big change, it's not a game changer for me.
Flippen: Maybe I just haven't been around the block long enough, because I really wasn't actively following Walmart when they did make that acquisition, that expensive acquisition, for Jet. So, I'm new, right; I'm coming in with a fresh face, which could really leave me in position to get burned by this statement, but I'm making it anyway. [laughs] I think this succeeds and I'm going to -- I finally found the quote I was looking for earlier, here's a quote from management that they said about this launch during their earnings call today. They said, "we think that it's not just about food and consumables, we think the assortment breadth and our ability to deliver with speed nationally, combined with a few other benefits, (emphasis added) will result in a compelling proposition."
In my mind, I kind of agree with you, if they just end up going with some sort of grocery delivery, what really is the value there? But when I see Walmart investing into healthcare, investing into their e-commerce channel with third parties, I think to myself, maybe there is value that they can provide that Amazon can't, that would make me a paying Amazon Prime subscriber. And I am very frugal, [laughs] I do not spend money easily, right? Maybe there will be something they can provide that will make me want to switch my Amazon Prime membership to Walmart. Now, that's a big statement, I don't know what that looks like yet, but I'm not ready to write it off entirely.
Kline: So, if there's a healthcare component to this, that could be a game changer, I think mostly what they are focusing on is, this won't just be grocery delivery, it will be full-store delivery. And, hey, that's great. If I don't feel well, I have a touch of the flu and I need some tissues, some chicken soup, you know, some NyQuil, whatever it is, and I could put together a little order and it shows up in 90 minutes, that's fabulous. It's also a really small niche, because you know what people like doing, they like going to stores. And there are times, not now, but there are times when it's inconvenient to go to a store and it's great to have a service like this.
Look, I needed some cables earlier today and I just bought them from Amazon because they'll be there tomorrow. Could I have driven over to Best Buy? I could've, but I'm doing a lot of shows today and it's difficult to have the time to do that. And do I want to take my time at night to do something, where if I wait, like, 16 hours, it will be there? So, might I have placed an order from Walmart if they had those items and they would deliver me in two hours? I might have. Amazon will answer, whatever they're doing, and my guess is, they'll take it a step further. Because the one thing you could say with Amazon is your Prime membership gets you hundreds of millions of items delivered on a one- or two-day basis, while for Walmart, it's only a few million items. Now, they increased that to the full depth and breadth of the local store. Good luck with that, because their ability to handle the 2 million or 3 million items and do it efficiently; look, I've detailed by problems with, hey, order this, pick it up in the store, we'll send you an email when it comes in, and it's like six days later and it was supposed to be that day. They have not quite figured this out. I'm very confident in Marc Lore, he was the Jet.com founder, he runs their e-commerce operations. They'll get there, but I think it's going to take a while and I think it's going to give Amazon plenty of time to make sure they adjust their offering along with it.
Flippen: Yeah, that's fair enough. And if history is telling, you don't want to be [laughs] going up against Amazon, right? With the money and the expanse that Amazon has, they are truly a formidable competitor, but we'll see what happens. Not ready to switch my subscription just yet. [laughs]
Kline: Walmart has shown they can compete, and that's really important. You know, you weren't talking about Walmart in grocery six months ago, and now we're talking about how maybe Kroger can't compete with Walmart; that is a systemic game change.
Flippen: That's a very, very good point. We're all not Berkshire Hathaway upping our stake in Kroger right now. [laughs]
So, let's talk about our last real story for this episode, and that's Kohl's earnings. I'm not sure if it's best we saved it for last, because maybe this is a harder story to make positive, but it was nice while it lasted, right? We saw earnings from Kohl's come out today. And I'm not ready to write it off as a [laughs] terrible quarter, but it definitely wasn't Home Depot, and it definitely wasn't Walmart.
Kline: Yeah, I'm going to say this is a decent quarter. So, second-quarter net sales dropped 22.9%, that's not great, but, Emily, heading into this, did you expect it to be any better?
Flippen: My, maybe ignorant, thought process was, well, if lots of people are making orders on Amazon, and Kohl's has this agreement with Amazon to accept returns, in places where they were accepting returns, maybe there is an increase in foot traffic and maybe they wouldn't be as badly hit.
Kline: So, I think there was an increase in foot traffic, though I did not listen to the earnings call, so I'm sure they commented on that. But that said, prices at Kohl's right now are fairly depressed. When you go into any clothing store, there are a lot of sales. Their goal is to clean out merchandise for there to be better days. So, there are a lot of bargains to be had. I wear the same black polo shirt every day; and we've had this discussion before. But I usually wore a Kohl's brand or a J.C. Penney brand. And I was able to buy IZOD for the same price I was buying, and it's a much-higher quality, and it is a much-higher price point normally.
So, I think Kohl's, you might find -- and we don't have this number in the earnings report -- that their transaction count was really good, but their overall sales number wasn't great because they are selling a lot of things at a discount. But here's the number that people got excited about, they lost $0.25 per share, that's smaller than the $0.83 a share that Wall Street analysts had anticipated. Revenue was also above estimates. They did not report comp sales due to the rolling nature of store closures and what's open, what's not open. They also made a point of saying that they have strengthened their financial position during the quarter, ending with $2.4 billion in cash. Emily, it's a qualified positive. You know, when something is this disastrous, if they had come out and said, our sales were down 75%, would you have been absolutely stunned? I wouldn't have been.
Flippen: I suppose not. And to your point about management not really making a comment, at least not outside of their earnings call about traffic, the very little comment and color they provided to traffic was in the context of their Amazon returns partnership. Essentially what they said is, we moved the Amazon returns option to the back of the store to "allow for greater social distancing," [laughs] which to me said, make sure people walk through the entirety [laughs] of Kohl's before they can make their Amazon return, to please get them to buy at least something. That, to me, is a little bit of a yellow flag. Because what that says to me is management expected there to be more sales as a result of Amazon returns from where they had them placed originally and it just wasn't happening. So they had to move it [laughs] to the back of the store.
Kline: So, let me ask the question, why wasn't it in the back of the store in the first place? The only point of them doing this was to have traffic and expose it to all the things Kohl's sells. And Kohl's sells some bizarre stuff; they are a confusing store. They have that section where they sell, like, coffee makers and appliances, there's a bedding section, there's a little toys section, there is sometimes a home goods section. You want to expose the customer to everything, especially now, because I would say the bread and butter for Kohl's is work clothes. And, Emily, we go to work every day, sort of, but we don't go anywhere. I mean, I go a mile from my house to an empty room with a green screen, and you work in your living room. Are you dressing the same you used to dress, are you putting the effort into this that you would have put in when going into the office on a daily basis?
Flippen: Well, Dan, you did see me yesterday and I may have been wearing the same shirt that I'm wearing right now as we tape this. So, I think it's a fair statement to say, no, [laughs] I am not putting as much effort into my wardrobe as I did previously. Maybe there's an argument to be made that as people do start slowly trickling back into their works over the next few months, once we get a vaccine, whatever it may be, that there will be an increase in purchasing work clothes, if for no other reason than all of our work clothes no longer fit. [laughs] I don't know about anybody else, but maybe we'll need to go out and buy some new pants, buy some new shirts when we're expected to go in-person again. I'm not sure if that's going to be enough to really be a reason to own shares of Kohl's, but maybe that's something that acts as a tailwind to them at some point in the future. Either way, this quarter, it was not as disastrous as it could have been, but things are not looking up right now.
Kline: So, I would not own shares of Kohl's, but if you had to ask me if I would bet on Kohl's surviving, I think it will. I don't think it's out of the question that Amazon and Kohl's partner more heavily as a way to display Amazon owned and operated brands. It is a weakness for Amazon that they own, in theory, a lot of good clothing lines that you can only see on their website, that's something they might solve with technology, they might solve with their own stores, but they could solve really easily with Kohl's, and that would make sense, buy 49% of Kohl's.
That said, I do think we're going to need places to buy clothes. And as chains like Dillard's shrink or go away, chains like JCPenney shrink and maybe go away, many of the mall retailers, specifically ones that cater to women, like Ann Taylor, have struggled and are closing stores, some that tailor to both genders, like Gap, have struggled.
I do think there's going to be a place for Kohl's. I'm a Kohl's shopper. You know, it's reasonably affordable; they have a good selection; it's pretty easy as a place to find, there's a lot of them. So, I'm confident about the brand, I just don't know that it's a great investment.
Flippen: Fair enough. I agree with you about Kohl's, I think it probably survives this, if for no other reason, than that [laughs] Amazon partnership. But they do still have a loyalty program that has something like 30 million members in it. So, there's something to be said for the audience that does frequent Kohl's, it's not JCPenney, at least not yet.
And before we wrap up today's show, I know we wanted to give a little bit of -- I'm not going to officially call it an earnings preview, but we're going to discuss Target. Target is reporting, I believe, in the morning tomorrow, Wednesday, the 19th. So, after we're taping this episode. But we can't talk about Walmart, we can't talk about Home Depot and Kohl's without also mentioning one of the other big retail giants, and that is Target. Do you expect Target to be just as strong as Walmart, or worse, or better even?
Kline: I think it could be better, because I do think Target has some trendier brands, you know, some owned and operated that may be exciting to people a little bit, maybe they sold a little bit more clothing than expected. But it's going to be in the same range. Their first quarter sales were up 11%, triple its expansion rate from the year-ago period. Obviously, they've had some expenses in terms of COVID-19, but they were also well positioned owning Shipt with their ability to do delivery, to do curbside pickup.
I don't think people think Target for groceries as much as they think Walmart. And it depends where you are, if you have a redone Target that has the full, sort of, grocery remake, it absolutely lives up to any other grocery store, if you have an older Target that just, sort of, has the tacked-on groceries. I understand they're in the middle of remodeling a lot of their stores. I've talked about this with you before; the remodeled store near me in Davenport, Florida, is stunning, it is a fun place to go. You know, it has a Disney store that's an experience, it has a liquor store that's an experience, it's well spaced-out and feels really bright and airy. And I think that's going to be a driver for them. So, I expect the numbers to be very good, but this could be one where they come out and report 15% growth, and it wasn't 25% growth, so the market could not like it. I think that's possible.
Flippen: I think that's possible, too. I would also just express some concern about -- we talked about clothing, a fair amount of what attracts people to go to Targets, especially with foot traffic, is their clothing offerings. And if people simply aren't buying as much clothing or aren't, you know, feeling the need to walk around a Target the way they were pre-pandemic, then that could also potentially negatively affect them.
I feel like, in my mind, there's a more compelling reason for me to visit a Walmart during a pandemic than there is a Target, but to your point, Dan, I'm not surrounded by one of those fancy upgraded Targets that maybe compete more on the holistic experience as compared to a Walmart.
Kline: Target has also been one of the few places I've been. Not that I haven't been going out, but I've been doing a lot of grocery order and maybe a once-a-week stop by Whole Foods. I mean, I've been to Disney and casinos, so I can't say I'm not going out.
But Target is kind of entertainment as well. If I'm going to Target, my son wants to come and we'll walk through electronics, we'll walk through the nerf gun section. We're not necessarily making a lot of purchases. I think both of these companies, Walmart and Target, are benefiting from the cancellation of summer camps, they're selling a lot of basketball hoops. I got a hoop for some kids who went to my old summer camp that I, sort of, big brother. And it wasn't easy to find. I think things like televisions, you know, they're at good prices, but they have not been heavily marked down, because we're upgrading our televisions. The Target near me is always sold out of some models of Roku and some devices like that, because people are consuming them on a heavy basis.
I think both of these stores benefit from sales trends, they benefit from the work they already did on supply chain, and they benefit from the fact that some stuff people would usually buy from Amazon -- for the first few months of this, Amazon said, nope, we're going to focus on certain things, we're not going to replenish our weights or our basketball hoops, because we have to get food and toilet paper out to people. By the way, good choice, because food and [laughs] toilet paper are more important than basketball hoops.
But once you shop at Target and join their app and give them your information, we can talk about this over and over, you're a customer, it's easier for them to get to you, it's more likely you're going to go back. So, I'm actually an in-store Target customer, I can't remember -- I ordered taco shells during the pandemic, because I couldn't find them anywhere else, from Target and padded that out with a few other things. But for the most part, I do not use their digital product, but that said, I think they have a really loyal customer base and the numbers are going to be good, Wall Street just may not respond well to those [laughs] numbers being good.
Flippen: Understandable. I love doing this show because it's very rare that we get to say the earnings of Walmart, a Kohl's -- OK, Kohl's is a bad example -- Walmart, Home Depot or Target rivals that of pre-pandemic SaaS companies, right. [laughs] The increases in sales. It's not very often that we get to say these are growth-style companies. And more and more every day these are looking like companies that are truly showing their worth during this pandemic. So, this is a fun episode and I look forward to seeing what Target has to say tomorrow morning.
Kline: And Costco and some of the other big retailers. I think this is going to be a telling quarter about the future of retail.
Flippen: Definitely. Dan, thank you so much for joining.
Kline: Thanks for having me.
Flippen: Listeners, that does it for this episode of Industry Focus. If you have any questions, you can always shoot us an email at [email protected] or tweet at us @MFIndustryFocus.
As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don't buy or sell anything based solely on what you hear.
Thanks to Tim Sparks for his work behind the screen today. For Dan Kline, I'm Emily Flippen, thanks for listening and Fool on!
