On Wednesday, T.J. Maxx parent TJX Companies reported quarterly results that fell short of analyst estimates, while home improvement chain Lowe’s benefitted from pandemic-related demand. Refinitiv’s Jharonne Martis joins Yahoo Finance Live to break down earnings for the holiday quarter, and discuss the general state of retail.

Video Transcript

JULIE HYMAN: Something a little more bricks and mortar, so to speak, a little more concrete that we can talk about are the retail earnings coming out this morning and that have been coming out this week. We heard from Lowe's and TJX this morning. On the low side, that company continued to see strong same-store sales up 28%. That's above analyst estimates. People fixing up their homes, that's been driving demand for Lowe's.

Over at TJX, that company's earnings and sales did miss estimates, so even though, as Brian Sozzi talked to us about the other day, TJX has been one of the retailers that has managed through not just the past year, but the past several years a little better than some of its competitors.

Let's bring in Jharonne Martis. She's Director of Consumer Research at Refinitiv. Jharonne, it's good to see you once again. And so as you look at-- let's focus in on this morning in particular first.

I mean, it seems like when it comes to the home improvement retailers, they really have been the beneficiaries of this trend of people fixing up their homes. And when you look at Home Depot and Lowe's in particular, do you think that they have also done the right things? Or have they just sort of benefited from that trend?

JHARONNE MARTIS: Definitely, they've done the right things. One key component in order to survive the pandemic and to remain competitive in the retail space has been the omnichannel experience. And these are companies that have invested in the omnichannel experience way before the pandemic, and therefore were in a much better position compared to a lot of its-- a lot of their peers.

Home Depot yesterday saying that digital sales grew about 83%. But even though consumers went online to make those purchases, they still gravitated to the stores to do the pick ups. Like over 50% of those orders were pick up in stores. Lowe's today reported also strong digital sales of 121%.

But in general, what we're seeing is that the retailers that are beating earnings estimates, like Home Depot and Walmart, they've all been very vocal that they will continue to invest into the technology, because this is key, and this is where the future is heading. They're telling us that even after the pandemic, they believe that a lot of these consumer behaviors will remain permanent. And in a survey with Maru/Blue Public Opinion, Refinitiv did discover America-- that Americans, about 70%, will continue to shop online even after the pandemic.

BRIAN SOZZI: Jharonne, what has surprised me before, and I think has left me scratching my head, is the strength that has continued or that continuing into January and even February. Home Depot called it out. Lowe's called out strength on its press release this morning, sales strength has continued into February.

TJ Maxx called it out. Even dusty old Macy's called it out yesterday on its earnings call. Do you think we're-- we're looking at a spring consumer spending boom? And what is driving that?

JHARONNE MARTIS: In terms of the home stores like Home Depot and Lowe's, it's a little bit more seasonal, because they always tend to get a boost because of gardening and also outdoor barbecue gear. So they're definitely going to continue to see that strength. And consumers, when we look at the projected winners for 2021, are continuing to invest in the stay-at-home experience. It's like you said, the numbers have been very robust.

Look at Crocs yesterday, right. They've done a really good job and market themselves as a comfort shoe. And consumers are right now choosing comfort over fashion, and that's the theme that we're going to continue to see throughout 2021. 2021 will be more of a transition year, and then we might start seeing some of the recovery in 2022. So as for the year 2021, the outlook still shows that the stay-at-home stocks will continue to do well, like the Home Depot's, the at leisure, and items that are offering consumers more comfort.

MYLES UDLAND: You know, Jharonne, I'm curious, though, as-- as things change in 2022, I mean, you know as well as anybody that retailers aren't exactly the most nimble group. And I'm worried if-- or should investors be concerned, rather, that they get caught with an inventory glut, they get caught flat-footed with maybe the speed with which those stay-at-home trades cool off, because I think we're all ready to no longer stay at home? And is there a risk that this 90, 180-day lead time on how you're merchandising your store ends up with yet another version of a store people don't want to shop in.

JHARONNE MARTIS: Absolutely. And I think what you're saying is already being reflected, right, in the performance that we're seeing in the stock market. Investors are already shifting their gears. They're going from pandemic stocks to reopening stocks, even though these retailers are still beating and posting robust numbers, because everybody is in an urge to see that reopening happening.

But ultimately, even though governments opened economies and retailers are opening stores, the consumer decides when it's safe again to return to the mall. And they're telling us that even after COVID, they are still planning to avoid crowds, and shop online, and practice social distancing measures. So what we're seeing is that in terms of the inventory levels, like you-- you asked, that's always going to have to-- that's always an adjustment.

Even for TJ Maxx that was an adjustment, right. And they're going into the year with leaner inventory levels. Macy's, they had to cut significantly the amount of inventory cost cuts in order to beat earnings estimates. So this is a never ending story for them in order to adapt and change.

And that's why a strong omnichannel presence would save those retailers going into the pandemic, because they were able to use their stores as fulfillment centers and their approximately-- their proximity to the consumer. So it's a never ending shift, and we're going to continue to see the shift as the retailers reopen in order to adjust, again, their inventory levels as consumer spending and consumer behavior continues to shift.

BRIAN SOZZI: Jharonne, and really to your point on inventory, I walked into my nearby Macy's over the weekend. It was really completely empty. And I think that reflects the fact they cut about 30% of their inventory coming out of the fourth quarter just to save on costs. So that really, I think, ultimately raises the question, and I'll put it to you, do you think consumers are looking at really strong levels of inflation in apparel in the first half of this year, because if they're holding less inventory, they're going to have to push up prices if they want to make their sale [INAUDIBLE].

JHARONNE MARTIS: In terms of apparel, yes. But when Macy's reported yesterday, they saw a lot of strength in their home goods, and that's what helped them beat earnings estimates. So we're still seeing that that strength is there. Even in TJ Maxx's numbers today, the home goods was the only one that saw positive double-digit growth, again, reinforcing that the strength is there. So the consumers-- so the retailers are focusing on the areas that-- of strength.

And then in terms of apparel that-- those suddenly are not being sold. In fact, the-- the department stores lost a lot of their market share in apparel to the discounters. Target stole a massive number, millions, in market share from the department stores as consumers made that shift and are now purchasing at leisurewear at Target as opposed to department stores.

So it's remarkable how long the department stores have been surviving and have been working on their survival. They've been doing that by cutting costs. Whereas Home Depot and Lowe's, they've actually gained more cost. Home Depot saying that they-- in 2021, they've only added $2 billion in additional cost because of compensation enhancements, and still on top of that, and still gaining $2 billion in cost, they still managed to post impressive earnings.

So these companies, Home Depot and Lowe's who've done their homework and invested in the omnichannel experience, are much better positioned. And let's not forget, even post-pandemic when consumers start feeling more comfortable, they're going to allow those professionals to come into their house and remodel their kitchen. So they still have room to grow even post-pandemic as consumers become more comfortable in allowing the professionals into the house to fix it.

JULIE HYMAN: Yeah, that's really going to be the key, isn't it? And that's one of the big questions for not just these companies, but pretty much all companies, what's going to happen after all of this. So that's an interesting look forward. Jharonne, great to see you. Thank you so much. Jharonne Martis is Director of Consumer Research at Refinitiv.