If you spent your stimulus check at Walmart, Best Buy or Target last month, you’re not alone.
Much of the stimulus check money received by American taxpayers was used for necessities like groceries and bill payments. But according to recent earnings reports from these major retailers, many Americans headed to big-box stores soon after receiving $1,200 payments from the CARES Act to purchase non-essentials like clothes, electronics, and home goods.
Walmart’s sales slowed during the first half of April as social distancing measures kept shoppers at bay, but sped up as the government’s stimulus money made its way to wallets.
“Call it relief spending as it was heavily influenced by stimulus dollars leading to sales increases in categories such as apparel, televisions, video games, sporting goods, and toys,” Walmart CEO Douglas McMillon said during the company’s first-quarter earnings call Tuesday. “Discretionary categories really popped towards the end of the quarter.”
Target also saw sales growth around the time shoppers got their hands on $1,200 checks from the IRS. While Target shoppers focused mainly on food, beverages and essential items in mid-March, the retailer saw a surge in its discretionary categories like apparel in mid-April, once the stimulus checks arrived in customers' bank accounts.
“We certainly saw an uptick as we reported, starting on April 15 as those checks arrived across America,” Target CEO said Brian Cornell said on Wednesday’s earnings call.
Best Buy was able to retain about 81% of last year’s sales even as its stores shifted mid-quarter to a curbside-only shopping model, Best Buy CEO Corie Barry said in the company’s first-quarter earnings report released Thursday. The retailer saw sales growth in computing, gaming and small appliances throughout the quarter.
“Like many other retailers, we saw sales benefit during the last three weeks of the quarter as customers undoubtedly chose to spend some of their government stimulus money on the products and services we provide,” Barry said on a call that followed the earnings release.
The arrival of the stimulus checks –– and the discretionary spending driven by those checks –– comes at a time when grocery shopping has been much more top of mind than non-essential items. In the first quarter of 2020, the top mobile spending category was groceries, according to Comscore, which tracks online retail spending. It’s the first quarter that apparel and accessories didn’t take the cake for the most mobile spending.
Stimulus recipients this year are spending a lot more of the money on food via groceries and takeout compared to past economic crises, according to a study from researchers at the Kellogg School of Management at Northwestern University that uses spending data from SaverLife. In the past, a large portion of stimulus checks went to big durable purchases, like cars, the researchers said. People have been spending their stimulus checks quickly in 2020 too, which speaks to how badly the money was needed: The average recipient had spent one-third of the the money in just 10 days.
Even with the increase in discretionary spending thanks to stimulus checks, many retailers are struggling. A recent report from the Census Bureau showed sales at clothing and accessories stores in April were down 89% from the same month last year, and retail sales dropped 16% from March 2020. Already, J. Crew and J.C. Penney filed for bankruptcy while Pier 1 announced it would wind down its business after not being able to find a buyer. Meanwhile, grocery store sales were up 13% from the previous month.
While the stimulus money helped major retailers in April, they won’t necessarily be able to keep up the pace as stores in many states stay closed.
“We've had a solid start to May in the U.S. but we believe stimulus spending has been a big driver, which we don't anticipate staying at these levels throughout the quarter,” Walmart CEO McMillon said on the earnings call.
While the possibility of a second round of stimulus checks is still very much uncertain, America's big retailers and small businesses alike have good reason to hope the IRS sends out another payment.