Wednesday, September 9, 2020

Today Calcbench kicks off another of our occasional in-depth looks at a business sector, this time examining the retail industry.

Retail firms have taken it on the chin in 2020 with the double-whammy of pandemic and recession. So what have those pressures meant for business operations and financial disclosures? That’s what we want to explore.

First up: in-store sales versus e-commerce.

We selected this subject after reading the latest quarterly filing for Lululemon Athletica ($LULU), the sporting apparel business that mostly sells yoga pants. Lulu filed its second-quarter report on Sept. 9, and the gap between store sales and e-commerce is just striking.

In-store sales fell by 55 percent in Q2 2020 compared to the year-earlier period. That shouldn’t be a surprise, since vast swaths of North America (which accounts for roughly 80 percent of Lulu sales) had shut down retail stories or otherwise told people to stay home.

But what were those prospective customers doing while stuck at home? Apparently ordering yoga pants online, because e-commerce sales jumped by 154 percent for Q2 2020. In fact, e-commerce sales rose so much in Q2 that they more than made up for declines from in-store sales.

See Figure 1, below. Total Q2 sales figures are high-lighted in blue.

Now, if you do the math, it’s clear that e-commerce sales have not been enough to keep revenue moving in the right direction for the first half of 2020 — which means that the numbers must have been worse in Q1. So we used our handy “Add Previous Period” feature to see what those numbers were. They are in Figure 2, below.

So Lululemon had begun a pivot to e-commerce in Q1 2020 when the pandemic arrived, and then ramped up that pivot dramatically in Q2. Net income is still down sharply from the year-earlier period ($86.8 million in second-quarter 2020 versus $125 million in second-quarter 2019), but the segment disclosures suggest an impressive bit of repositioning, all things considered.

What Others Say

Intrigued by Lululemon’s disclosures, we looked for other retailers’ disclosure of e-commerce revenue, too.

Specifically, we assembled a list of more than 40 large, high-profile retailers; everyone from Abercrombie & Fitch ($ANF) to Walmart ($WMT). We then strolled over to our Segments, Rollforwards, & Breakouts database to see which ones report e-commerce.

Spoiler: not many.

If you search for “commerce” in the operating segments filter, only four reported any data: Walmart, Party City ($PRTY), Tilly’s ($TLYS), and Signet Jewelers ($SIG). Applause goes to Signet for also breaking out e-commerce revenue by geography; and to Walmart for breaking out e-commerce revenue by major operating brand.

Still, four out of 48 major retailers ain’t much. We also looked under “online” and “direct” (for direct to consumer, as Lulu describes the segment) and found none others.

Walmart’s disclosure of e-commerce is tricky. Yes, the company does report those numbers — but not in table format. You either need to read the footnotes closely, where Calcbench does find the numbers because they are tagged; or search in our Segments disclosure database, where we present the tagged numbers.

See Figure 3, below, for what we mean. You’d need to read that written passage high-lighted in blue, below, to see that Walmart essentially doubled its e-commerce revenue from Q2 2019 to Q2 2020.

Still, the pivot to e-commerce revenue is going to be crucial for retailers — especially if they want to compete against Amazon ($AMZN), which has been building e-commerce expertise for 25 years. So the more retail firms disclose about this operating segment, the better.

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