But, in spite of this, there have been some bright spots.
While not comprehensive, our list of unlikely beneficiaries of the pandemic touches several sectors of retail, even those that have been the hardest hit.
Pet retailers have historically been considered recession-proof even as consumers pull back on other spending. That's largely because pets are increasingly seen as extensions of the family, so owners are willing to pay for what they think is best for them.
Chewy, however, has the added benefit of operating exclusively online at a time when consumers are seeking alternatives to in-person shopping. According to a Gartner survey, 46% of consumers increased how frequently they shopped online between March and May, while at the same time, 63% of respondents decreased how frequently they shopped in stores.
Traditional pet retailers were allowed to stay open during mass shutdowns because they were deemed essential, but they still faced traffic declines. Sales at PetSmart, Petco, PetValu and Pet Supplies Plus decreased toward the end of March and early April, but sales at Chewy increased 28.7%, according to Earnest Research.
"Chewy's advantageous positioning in the pet industry's race towards e-commerce, our culture of innovation, and our singular focus on customer experience resulted in another quarter of outperformance," Chewy CEO Sumit Singh said in a statement on the retailer's second quarter earnings, noting records in sales growth and new customers. "As e-commerce undergoes meaningful changes, multi-year growth curves have been compressed into timeframes measured in quarters, if not months."
In its most recent quarter, the retailer reported net sales grew 47% to $1.7 billion, with autoship sales delivering $1.2 billion — or 68.3% — of that. Chewy also grew its active members 37.9% year over year to 16.6 million. According to Singh, the new customers the retailer has added in Q1 and Q2 have surpassed the total number of new customers added in all of 2019.
The apparel sector has arguably been one of the hardest hit during the pandemic. In April, a month most nonessential stores were shut, retail sales in the key sectors tracked by retail dive fell by 16%, which included an 89% plunge at clothing and accessories retailers.
Even in more recent months as stores reopened, the apparel sector continued to suffer. In August, apparel retail sales were down 24% from a year ago.
Retailers selling apparel have continued to post steep earnings losses. But among those struggling, one retailer has benefitted from the seismic changes the pandemic brought on: Lululemon.
The brand, which sells products that walk the line between athletics and athleisure, has been able to capitalize on the casualization trend that was heightened by the pandemic as much of the workforce continues to work from home.
As COVID-19 became rampant in the U.S., CEO Calvin McDonald in late March reiterated the company's intent to stick to its Power of Three growth plan, which includes doubling men's and digital revenues by 2023 and quadrupling international revenues.
"We had fantastic momentum coming into the current situation," McDonald said at the time. "And there is nothing that I believe will fundamentally change our ability to regain that momentum."
The retailer also snapped up at-home workout platform Mirror in June for $500 million, helping it to further benefit from consumers opting to do most things from home during the pandemic.
Lululemon in its most recent quarter reported net revenue increased 2% to $903 million, with e-commerce up 155% year over year to $554 million. The retailer sees strength in its brick-and-mortar presence despite the pandemic: Lululemon said it would increase its holiday pop-ups from 50 locations to 70.
"We continue to believe physical stores are and always will be an extremely important part of our ecosystem," McDonald said. "[T]hey enable so much more than simply the purchase of apparel by our guests. Our stores are our local hub and communities across the globe, gathering spots for our ambassadors and our connection to local studios, facilitate e-commerce transactions via our ship-from-store and buy online, pick up in-store capabilities and are a portal to bring new guests into our brand, particularly men."
Dick's Sporting Goods
The pandemic didn't initially give Dick's Sporting Goods a boost. In the quarter ended May 2, the retailer reported net sales fell by 30.6% to $1.3 billion, while its consolidated same-store sales fell 29.5% driven largely by temporary store closures toward the beginning of the crisis.
However, Dick's was able to rebound in Q2 as consumer demand for at-home workout and sports gear ticked up.
According to NPD Group research, sales of goals and nets for various sports increased 38% in March from last year to $13.5 million, while sales of basketballs and footballs grew double digits. The firm also reported a 130% increase in fitness equipment sales.
"The sports industry is experiencing unprecedented growth and high demand for a distinct mix of products during this adjustment to an extended stay at home," Matt Powell, senior industry adviser for NPD's sports practice, said in a statement. "The consumer lifestyle shift as a result of the current circumstances has put the sports business in a unique position compared to most other industries. I anticipate we'll see a renewed emphasis on health and fitness for the long term."
In August, Dick's reported its best-ever quarterly earnings and sales figures as a result of this trend, with comps up 20.7% during the second quarter and net sales up more than 20% to $2.7 billion. The retailer's e-commerce sales, which include its contactless pickup option, shot up some 194% in the quarter.
"This success online is a direct result of the technology and fulfillment investments we have made over the years, as well as better integration of our digital and store channels," Dick's Sporting Goods President Lauren Hobart said on a call with analysts.
Among the club retailers, BJ's has always skewed more toward grocery, and committed to adding more offerings to its selection last year, something it benefited from as consumers stocked up during the pandemic.
In the second quarter, the club retailer said comparable sales in its grocery division grew by 25%, while overall comps (excluding gasoline) grew 24.2%, which includes digital sales growth of more than 300%. BJ's also reported net sales grew 18.4% to $3.9 billion and net income increased 95.5% to $106.6 million.
"We delivered another remarkable quarter with strong comp growth and record profitability," BJ's President and CEO Lee Delaney said in a statement. "Our business has been transformed and strengthened in the last six months by every measure. We are extremely well positioned to continue to win as we invest in digital capabilities, membership, assortment, marketing and geographic expansion to further accelerate this transformation."
To enable continued growth in its digital business, BJ's in August rolled out curbside pickup services to all 219 of its stores, something its larger rival Costco has yet to offer its customers.
On a call with analysts discussing Q2 results, CFO Bob Eddy said its paid membership base grew 10.6% from last year to 6 million.
"We are not the company we were six months ago, six quarters ago or six years ago. We have added more members and are accelerating investments to improve all facets of our business," Eddy said.
Sales increases at mass merchants were expected as consumers stocked up on the essential goods offered at these retailers. And while Amazon and Walmart also received significant boosts during the pandemic, Target's fulfillment offerings helped make it an e-commerce destination.
The retailer posted a strong second quarter, which included its best-ever comparable sales growth, of 24.3%. Its store comps grew nearly 11%, while its e-commerce comps grew 195%. But comps for Target's same-day fulfillment services, which include Pick Up, Drive Up and Shipt, ballooned 273%.
"Target's strong omnichannel offer, which allows consumers to receive products in numerous ways, including collecting in stores and at the curbside, came into its own," GlobalData Retail Managing Director Neil Saunders said in emailed comments at the time. "For many retailers, services like curbside pickup were new innovations over the past few months; for Target they were already well-established elements in its business model. During the quarter, over 90% of sales were fulfilled by a store in some way and this allowed Target to cope with the enormous spike in demand and do so profitably."
The mass merchant late last month said 10 million new customers shopped its website and demand for its same-day fulfillment services quadrupled in the first half of 2020.
To prepare for the all-important holiday season, Target committed to keeping its hiring "on par" with last year's 130,000 holiday workers, and plans to double the number of employees dedicated to its Pick Up and Drive Up services.