Americans splurge at Walmart, Target as stimulus checks kick in

Aishwarya Venugopal, Reuters

Posted at May 22 2020 07:28 AM

A shopping cart sits in an aisle empty of cleaning products at a Target store in Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, New York, US, April 1, 2020. Brendan Mcdermid, Reuters

The Trump Administration's coronavirus relief payment provided a fillip to sales of major retailers in April as millions of Americans used the money to buy everything from video games to sewing machines even as the country struggles with record job losses.

Walmart and Target Corp noted in their earnings call this week that quarterly comparable sales, which rose about 10 percent, got a major boost from increased demand for non-essentials at the end of last month.

"Call it relief spending, as it was heavily influenced by stimulus dollars," Walmart Chief Executive Doug McMillon said on Tuesday, citing a jump in sales of clothing, televisions, video games, sporting goods and toys.

The US government doled out relief checks of $1,200 in late April to help tens of millions of households cover essentials and cope with the financial distress brought on by the coronavirus pandemic as job losses reached 20 million.

However, as lockdown restrictions were eased, Americans moved away from stockpiling staples and instead splurged on discretionary big-ticket items, helping boost margins for retailers.

The shift also helped specialty retailers such as Best Buy and Advance Auto Parts Inc.

"We did see an increase on the week of the stimulus, but the week after the stimulus was better ... And then two weeks after was better than one week after. So we are seeing that sequential improvement," Advance Auto Chief Executive Tom Greco said.

Target CEO Brian Cornell said the company saw an increase in online and store traffic, both tied to the extra cash, but cautioned that the bump could be short-lived.

Edward Jones analyst Brain Yarbrough concurred, saying, "I wouldn't expect the trends you've seen in late April and potentially in the beginning of May to continue. That wouldn't be realistic."