Americans splurge at Walmart, Target as stimulus checks kick in

(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 (WMT.N) and Target Corp (TGT.N) noted in their earnings call this week that quarterly comparable sales, which rose about 10%, 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 U.S. 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 (BBY.N) and Advance Auto Parts Inc (AAP.N).

“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.”

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Target's online sales surge eases coronavirus pain

(Reuters) – A surge in Target Corp’s (TGT.N) online sales due to panic buying during the coronavirus crisis helped the big-box retailer post better-than-expected quarterly results on Wednesday, even as it grappled with soaring operational costs.

Target, like Walmart (WMT.N), benefited from customers stockpiling staples and cleaning products at the start of the quarter, while demand for non-staple items like beauty products, home goods and clothes rose as stimulus checks arrived late in April.

Although U.S. grocers and supermarket chains have seen a monumental surge in sales during the quarter, they have little to show in terms of profit as most of their funds were spent on bonuses and overtime payments to keep stores running during the pandemic.

“Last quarter was unlike anything I’ve ever seen,” Target’s Chief Executive Officer Brian Cornell told reporters. “It was intense, it was volatile, it was stressful for our guests and the country.”

Overall, online comparable sales jumped 141%, benefiting from investments in same-day delivery services such as in-store pick up, Drive-up and Shipt, and accounted for almost all of its same-store sales growth for the first quarter ended May 2.

Net profit, however, fell 64.3% in the quarter as operating costs rose 11%.

Target, which has already pulled its financial targets for the year, is setting aside nearly $500 million to spend on maintaining safety standards at stores and pay employees higher wages.

“There’s just so much uncertainty as I think about the balance of the year … Obviously we’re watching closely to see what happens from an economic standpoint,” Cornell said.

On an adjusted basis, the company earned 59 cents per share, beating already lowered expectations of 40 cents.

“Target is prioritizing being open for customers … This strategy makes sense, although near term results are likely to remain volatile,” Evercore ISI analyst Greg Melich said.

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Aston Martin posts deep loss as coronavirus outbreak hits sales

LONDON (Reuters) – Aston Martin (AML.L) posted a first-quarter pretax loss of 119 million pounds ($146 million) after sales dropped by nearly a third due to the impact of the coronavirus outbreak and the destocking of dealers, the carmaker said on Wednesday.

“COVID-19 and the resulting global economic shutdown has had a material impact on our performance this quarter,” said Chief Executive Andy Palmer.

The carmaker, which has seen core retail sales slump by an annual 31%, has furloughed staff, introduced additional safety measures and cut the pay of its senior management as part of measures to handle the crisis caused by the pandemic.

Canadian billionaire Lawrence Stroll, who leads a consortium which took a stake in the company earlier this year, hopes to pursue a turnaround partly by sharing Formula One technology with the firm’s range of road cars.

But the firm said on Wednesday the pandemic meant it could no longer provide full-year guidance.

“Given the ongoing uncertainties, as is prudent, the company continues to review all future funding and refinancing options to increase liquidity,” it said.

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Emirates to raise debt as it doesn't see travel recovering for at least 18 months

DUBAI (Reuters) – Emirates, one of the world’s biggest long-haul airlines, will raise debt to help it through the coronavirus pandemic that has shattered global travel demand, warning that a recovery in travel demand was at least 18 months away.

The state-owned airline, which reported on Sunday a 21% rise in profit for its financial year that ended on March 31, said it would tap banks to raise debt in its first quarter to lessen the impact of the virus outbreak.

Emirates did not say how much it expected to raise. The airline suspended regular passenger flights in March due to the coronavirus pandemic and has been promised financial aid from its Dubai state owner.

“The COVID-19 pandemic will have a huge impact on our 2020-21 performance,” Chairman Sheikh Ahmed bin Saeed said in a statement.

“We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption.”

Emirates Group, which counts the airline among its assets, will not pay an annual dividend to its shareholder, Dubai’s state fund. Its cash assets stood at 25.6 billion dirham ($7 billion), it said.

Dubai Ruler Sheikh Mohammed bin Rashid al-Maktoum said in the group’s annual report released on Sunday that he was confident Emirates would emerge from the crisis strong, and a global leader in aviation. There was no apparent mention of the state aid, which has been promised by Dubai’s crown prince.

The airline said it made a profit of 1.1 billion dirhams in the year to March 31, up from 871 million dirhams a year earlier. However, it cautioned that the virus outbreak had hit its final quarter.

Revenue contracted 6.1% to 92 billion dirham as the number of passengers carried fell 4.2% to 56.2 million.

In March, Emirates also temporarily cut staff pay due to the coronavirus pandemic. It is not clear when it will resume normal flights.

Rival Qatar Airways has said it would begin rebuilding its network from this month, while Abu Dhabi’s Etihad Airways plans to resume regular flights from June.

International connectivity is crucial for Emirates’ Gulf hub model, which transformed Dubai six years ago into the world’s busiest international airport. It does not operate domestic flights and most of its passengers transit through its hub.

Emirates sister company dnata saw profit drop by 57% in the year through March 31 to 618 million dirhams, which the company attributed to increased investment in its catering and airport services divisions and weak demand in its travel business.

Profit at the Emirates Group, which also includes dnata, fell 28% to 1.7 billion dirham. Revenue was down 4.8% to 104 billion.

Unfavourable currency exchange rates cost the Group 1 billion dirham in profit, it said, while it saw some respite from cheaper oil prices.

($1 = 3.6730 UAE dirham)

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Fox Corp quarterly revenue tops estimates as Super Bowl boosts viewership

(Reuters) – Fox Corp (FOXA.O) beat Wall Street estimates for third-quarter revenue and profit on Wednesday as Super Bowl broadcast boosted television viewership, sending the company’s shares up more than 2% in extended trading.

Revenue from the company’s television unit jumped 40.5% to $1.93 billion in the third quarter.

Net income attributable to shareholders fell to $78 million, or 13 cents per share, in the quarter ended March 31, from $529 million, or 85 cents per share, a year earlier.

On an adjusted basis, the company earned 93 cents per share, beating analysts’ estimate of 70 cents per share, according to IBES data from Refinitiv.

Total revenue rose to $3.44 billion from $2.75 billion, above analysts’ average estimate of $3.33 billion.

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GM investors want to know how much more coronavirus pain remains

DETROIT (Reuters) – Investors want to know what kind of economic hit General Motors Co (GM.N) expects from the coronavirus pandemic as it moves forward, whether it needs to raise further cash and when North American vehicle production will resume when it reports first-quarter results on Wednesday.

The Detroit automaker has slashed costs and made other moves during the COVID-19 outbreak, including suspending its dividend and share buybacks, closing its Maven car-sharing unit, delaying work on some product programs, reducing marketing budgets and cutting white-collar workers’ salaries. It also added $16 billion to its cash position by drawing down credit lines.

GM also has suspended its 2020 profit outlook given the uncertainty.

Smaller U.S. rival Ford Motor Co (F.N) last month raised another $8 billion from corporate debt investors to further shore up its finances after previously drawing down its credit lines.

GM Chief Financial Officer Dhivya Suryadevara warned employees in an internal video on March 26 that “significant austerity measures” were necessary to avoid “serious damage” to GM’s long-term viability.

One ray of hope has been China, where the pandemic began but where GM has resumed production. While first-quarter sales there fell 43%, they rebounded to grow by double digits in April. That offers hope for the U.S. market, where sales declined 7% in the first quarter.

U.S. automotive production ground to a halt in March as the number of COVID-19 infections grew rapidly. But with President Donald Trump pushing for Americans to get back to work and several U.S. states reopening their economies, the focus in the auto sector has shifted to when production can safely restart.

GM, Ford and Fiat Chrysler Automobiles NV (FCA) (FCHA.MI)(FCAU.N) are aiming to resume production some time in May and are negotiating with the United Auto Workers (UAW) union, which represents their U.S. hourly workers, about when and how to safely restart.

The Detroit automakers are anxious to end the cash burn that has occurred during the shutdown. While FCA said Tuesday it expects most of its North American plants to reopen by May 18, GM and Ford have not announced restart dates.

The UAW said last month that it was “too soon and too risky” to reopen plants in early May. President Rory Gamble said last week the union was asking for “as much testing as possible” to protect its workers.

In its restart playbook, GM’s strategy relies heavily on social distancing, temperature checks, regular sanitizing, improved plant ventilation and use of personal protective equipment, but does not address assembly line workstations.

Michigan Governor Gretchen Whitmer previously extended the state’s stay-at-home order through May 15 but lifted restrictions for some businesses other than manufacturing. Neighboring Ohio allowed manufacturing to resume on Monday.

Once production resumes, the question will be how fast U.S. demand rebounds, with some dealers expecting big discounts to lure consumers back to showroom floors.

Some industry officials have said some level of government stimulus for the U.S. auto sector will be needed for consumers once the pandemic recedes.

During the Great Recession of 2008-09, the U.S. government rolled out a “cash for clunkers” program, which offered consumers rebates of up to $4,500 to trade in older gas guzzlers.

Other U.S. automakers already outlined the pain caused by the crisis.

FCA on Tuesday reported a first-quarter loss of $1.8 billion, said it expected a significant loss in the second quarter and scrapped its full-year profit outlook.

Last week, Ford said its second-quarter loss would more than double to over $5 billion from $2 billion in the first quarter. Executives said the current economic environment was too unpredictable to offer a full-year profit outlook.

Also last week, Tesla Inc (TSLA.O) reported its third consecutive profitable quarter, but the results were overshadowed by Chief Executive Elon Musk, who described as “fascist” the sweeping U.S. stay-at-home orders that have idled the electric carmaker’s California plant.

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Hugo Boss expects 50% sales drop next quarter as crisis impact worsens

BERLIN (Reuters) – Hugo Boss (BOSSn.DE) is seeing signs of a sales rebound in China and online, but expects the impact of the coronavirus crisis to worsen before any recovery kicks in after first quarter sales fell by 17%, which knocked its shares.

Although Hugo Boss has begun reopening stores in Germany and Austria in recent weeks, its chief executive Mark Langer said shoppers were still few and far between in German cities.

The company expects second quarter sales to fall by at least 50% as three quarters of its stores are still closed. But is confident the retail environment will gradually improve from the third quarter of the year, supporting sales and earnings.

Hugo Boss said online sales jumped 39% in the first quarter to account for 11% of total sales and accelerated again strongly in April, with sales more than doubling on its own site and via partner websites and demand particularly strong for sportswear.

Langer said on Tuesday that those who do venture into Hugo Boss shops are very willing to spend at the German fashion house, which is best known for its smart men’s suits.

Hugo Boss also said all of its own retail stores and concessions have reopened in China since the end of March and sales in April were only around 15-20% below the previous year.

Hermes (HRMS.PA) has also said that business was picking up strongly in China after shops there reopened.

Hugo Boss said its first quarter sales were 555 million euros ($605 million), ahead of average analyst forecasts for 548 million, while it posted a loss before interest and taxation of 14 million euros, which was worse that the average forecast of 6 million euros.

Hugo Boss, whose shares were down 4.9% at 0817 GMT while the German midcap MDAX index .MDAXI was 2.2% higher on Tuesday, said it is targeting extra cost savings of at least 150 million euros this year.

The company, which had already announced moves to protect its cash balance such as suspending store renovations and new openings and limiting the inflow of stock, has no plans to seek state aid, Langer told reporters on Tuesday.

It is aiming to cut the inflow of inventory by at least 200 million euros compared to its original plan, including cutting its own production.

The CEO said Hugo Boss has already actively shifted stock to markets where stores are open and to online platforms, and will seek to sell other items via its factory outlets in early 2021,

Langer is due to leave Hugo Boss at the end of September, but stay on until the end of the year as a consultant while the company looks for a successor.

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Fast food sector hopes stimulus checks boost sales after tough quarter

(Reuters) – Slumping sales at big fast food chains could get a boost as hungry and restless customers spend stimulus checks after long lockdowns, analysts and some operators said ahead of quarterly earnings that will show the extent of damage from the coronavirus slowdown.

McDonald’s Corp (MCD.N) and Starbucks Corp (SBUX.O) issued earnings updates on April 8 that showed a sales hit from coronavirus disruptions. Investors will get more information this week – along with updated outlooks – when they and other companies officially report.

More states are beginning to ease restrictions on businesses that were shuttered to stem the spread of the outbreak – meaning more people will pick up meals and coffee before, after and during work.

Tired of eating at home for weeks, consumers may also seek someone else’s cooking, and restaurants are trying new ways of operating including continued use of masks and social distancing alongside plexiglass dividers at checkout.

“Sales trends have appeared to bottom, with restaurants suggesting benefits from a reduction in pantry loading, stimulus checks and home cooking fatigue have supported improving trends throughout April,” wrote Credit Suisse analyst Lauren Silberman in a note.

Stay-at-home orders from local governments and mandated closures have hurt big chains, though not as much as independently owned sit-down restaurants without drive-thrus or take-away.

Global same store sales for McDonald’s, which reports earnings on Thursday, fell 3.4% in the first quarter, according to an investor update the company on released April 8.

While the effect could linger, sales could be on the upswing after falling as much as 30% in the first week of April, according to a Kalinowski Equity Research survey of 20 franchisees published on Monday.

Broadly, breakfast and late night sales suffered, said Peter Saleh, restaurants analyst at BTIG.

Nobody knows how many consumers will return and how quickly, he said.

Brands with widely used, easy to operate apps – including the ability to order and pay in advance for pick up – may fare better, as results for Chipotle Mexican Grill and Domino’s Pizza showed last week.

“That is critical. You’re seeing digital spike for almost every brand out there,” Saleh said. “Those are exceedingly important avenues to the recovery.”

Also reporting this week are Dunkin’ Brands Group Inc (DNKN.O) and YUM! Brands Inc (YUM.N), which owns Taco Bell, Pizza Hut, KFC and The Habit Burger Grill, as well as Restaurant Brands International Inc (QSR.TO), which owns Burger King, Popeyes Louisiana Kitchen and Tim Hortons.

Starbucks, which reports second-quarter results Tuesday afternoon, still had only 44% of its U.S. company-run stores open as of the last week of March, it said in an April 8 update.

Its China business began to recover in late February and picked up pace through the end of March.

“Each week, we see more evidence reinforcing our belief that the business will fully recover over the next two quarters,” it said.

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BP's profit tumbles, debt climbs as coronavirus crisis hammers oil demand

LONDON (Reuters) – BP’s (BP.L) first quarter profits tumbled by two-thirds as the coronavirus crisis hammered oil demand and the energy major’s debt rose sharply as it warned of exceptional uncertainty ahead.

London-based BP said it expected significantly lower refining margins in the second quarter when global restrictions on movement to halt the spread of the virus reached their peak, throttling consumption of gasoline, diesel and jet fuel.

“It is difficult to predict when current supply and demand imbalances will be resolved and what the ultimate impact of COVID-19 will be,” BP said in a statement.

It said oil and gas production faced “significant uncertainties” linked to plunging oil prices and tumbling demand, as well as due to a deal between OPEC, Russia and other producers to cut global supplies of crude by about 10%.

BP reported an underlying replacement cost profit, its definition of net income, of $800 million, still beating the $710 million forecast by analysts in a company-provided poll. The company reported $2.4 billion profit a year earlier.

BP, like its peers, responded to a 65% drop in oil prices in the first quarter by sharply reducing spending. BP slashed its 2020 budget by 25% to around $12 billion and reduced output at its U.S. shale operations.

BP’s debt rose to $51.4 billion in the first quarter and its debt-to-capital ratio, or gearing, rose to 36%, significantly higher than its target of keeping it below 30%.

BP held $32 billion in liquidity at the end of the first quarter after the company, like its competitors, raised debt to build up cash reserves to cope with the drop in revenue.

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