Introduction

Our weekly Earnings Insights reports look at key commentary and qualitative insights from major US retailers and brand owners on their recent performance, in terms of revenues and comps, and the impact of the Covid-19 pandemic on fourth-quarter 2020 performance (ended January 31, 2021 for most companies). Companies featured are those within our Coresight 100 coverage list, and in this report, we focus on those that reported in the week ended February 7. For most US retail companies, the quarter under review will be the fourth quarter of fiscal 2020, but some of the companies covered have different year ends (e.g., Capri Holdings and Tapestry). In November 2020, US retail sales continued to rebound strongly despite several states reinstituting more restrictive mandates owing to the surge in new coronavirus cases. In December, US retail sales growth accelerated to 8.6%, from a revised 8.1% in November, as consumers continued to shift spending away from services and experiences to retail goods. Looking ahead to yet-to-be-reported January sales and projected sales in February, Coresight Research predicts that retail sales will increase by about 7% overall. We assess the recent performance of selected retailers and brand owners below.

E-Commerce

	Alibaba (NYSE: BABA) 3Q21
Commentary	Alibaba’s revenues grew 37% versus 30% in the prior quarter, driven by its core commerce business, which grew 38% and accounted for 89% of the company’s total revenues. Alibaba’s Tmall platform achieved physical goods GMV (gross merchandise volume) growth of 19%, mainly driven by the rapid growth of FMCG (fast-moving consumer goods) and the home-furnishing category, as well as accelerated growth in consumer electronics categories. Alibaba’s logistics platform Cainiao saw revenue growth of 51%, primarily driven by an increase in the volume of orders fulfilled from its fast-growing cross-border and international commerce retail businesses. Alibaba’s cloud business revenues grew 50% and turned profitable for the first time since its formation in 2009. Management said that the growth reflects the company’s continued push to diversify its business beyond e-commerce as it faces regulatory scrutiny in China.
Outlook	Going forward, management said that Alibaba will continue to invest in user engagement and growth, the digital transformation of businesses and employee development. In fiscal 2021, Alibaba has started to increase spending in its new businesses, such as Taobao Groceries, Taobao Deal and Taobao Live. In fiscal 2022, the company plans to step up its reinvestments of the incremental profits generated into its seed businesses—including Taobao Deals, Taoxianda, Taobao Short Video, Taobao Live and Taobao Grocery—and strategic growth areas to create long-term value for its customers, shareholders and employees.
	Amazon (NasdaqGS: AMZN) 4Q20
Commentary	Total sales grew 44% versus 37% growth in the prior quarter. By segment, North America saw 40% sales growth versus 39% growth in the prior quarter; International witnessed a 57% sales increase versus a 37% sales increase in the prior quarter; and Amazon Web Services (AWS) reported sales growth of 28% versus 29% growth in the prior quarter. The AWS segment added the highest year-over-year and quarter-over-quarter revenues in its history and has become a $51 billion annualized-run-rate business. Amazon saw strong demand and sales growth across major product categories, including hardlines, softlines, consumables and media. Amazon Fire TV now has over 50 million monthly active users globally. In 2020, Amazon massively expanded its distribution network: The company increased square footage across its fulfillment centers by 50% and allocated dedicated 60% of fulfillment-center capacity to third-party-seller products. CFO Brian Olsavsky said, “The 2020 holiday season was the best ever for small and medium-sized businesses selling in our store, with their worldwide sales growing over 50% year-over-year in Q4. Third-party units represented 55% of total paid units during the quarter, the highest 3P [third-party] unit mix we have ever had since we invited businesses to sell on Amazon more than 20 years ago.” Amazon observed that Prime members continue to shop across more categories and with greater frequency than prior to the pandemic. The company also observed that Prime members had expanded their usage of Prime’s digital benefits, including Prime Video. Amazon continued to step up its sustainable efforts. The company is investing in 26 new wind and solar projects worldwide, and it plans to achieve 100% renewable energy by 2025, five years ahead of its initial 2030 target.
Outlook	For 1Q21, Amazon expects net sales to grow 33–40%, including a favorable impact of about 3% from foreign exchange rates. The company expects operating income to be $3.0–6.5 billion in 1Q21, compared with $4.0 billion in 1Q20. This guidance assumes approximately $2.0 billion of costs related to Covid-19.
	eBay (NasdaqGS: EBAY) 4Q20
Commentary	Total revenues grew 28% versus 26% sales growth in the prior quarter. In 4Q20, the number of active buyers globally increased by 7%. Total GMV increased 21% in 4Q, in-line with the prior quarter. US GMV grew 25% and accounted for 36% of total GMV; and international GMV grew by 19% and accounted for 64% of total GMV. In 2020, the company added an incremental $14 billion of GMV, which is higher than the combined past seven years’ growth. Management said that the company is benefiting from its updated strategy, which includes drawing shoppers through fashion offerings, such as sneakers and watches, enabling easier payments and improving its mobile app. To expand its reach among Gen Z and millennial customers, eBay is investing in new channels, including social marketing. The company recently launched a TikTok campaign called Lace 'Em Up, which generated about 4.7 billion views. Furthermore, eBay has been partnering with celebrities, famous athletes and influencers on exclusive promotions.
Outlook	For 1Q21, eBay expects revenues of $2.94–2.99 billion, representing growth of 35–37% on an organic constant-currency basis based on the assumption of marketplace’s volume growth in the low 20s, led by strength in e-commerce and continued improvement in its consumer experience. For 1Q21, the company expects adjusted EPS of $1.03–$1.08, representing growth of 49–57%, driven primarily by higher marketplace volume, lower share count, managed payments and advertising, and partially offset by continued investments in product and marketing.

Luxury

	Canada Goose (TSX: GOOS) 3Q21
Commentary	The company’s revenue growth turned positive for the first time since the start of the pandemic. Total sales grew 4.8% versus a 33.7% decline in the prior quarter, driven by global e-commerce sales growth of 39.3%, with particular strength in the UK, France, Germany, Ireland and China. The company’s global direct-to-consumer (DTC) revenues declined marginally by 0.8% due to Covid-19 related disruptions, while Wholesale revenues were up 10.6% as partners and distributors requested later timings for shipments. In 3Q, total gross margin was 66.8%, with 77.9% at DTC and 51.5% at wholesale. Management said that China remains its strategic priority. In the past year, the company has more than doubled the number of stores it operates in China. In 3Q21, China DTC revenues increased by 41.7%. Management said that the company has a well-established strategy for expanding its penetration in Tier 1 and Tier 2 cities.
Outlook	For 4Q21, the company expects a low-double-digit year-over-year sales decline in wholesale business but noted that it had completed most of its shipments for the year. Canada Goose does not expect gross margin to expand at the same pace as it did in the third quarter due to seasonal spring products and a decline in wage subsidies and manufacturing. Canada Goose noted that 25% of its global own retail stores remain closed due to Covid-19 but believes it is “well-positioned” to moderate the adverse impact through its digital business.
	Capri Holdings (NYSE: CPRI) 3Q21
Commentary	Capri Holdings reported a revenue decline of 17%, a sequential improvement relative to the prior quarter when the company reported a 23% decline. E-commerce sales improved sequentially, rising 65% versus 60% growth in the prior quarter. By brand, Versace recorded flat revenues, while Jimmy Choo and Michael Kors reported double-digit declines in revenues. By geography, Asia remains the company’s fastest recovering region, with the area reporting positive retail sales growth across all luxury houses, led by double-digit growth in Mainland China.
Outlook	With 50% of its stores closed in the EMEA region at the start of its fourth quarter, Capri has revised down its 4Q sales guidance and now expects revenues to decline at a rate similar to the third quarter. For the full fiscal year 2021, the company expects revenues to decline by approximately 30%. The company expects its gross margin to expand by 100 basis points for the fourth quarter, driven by greater full-price sell-throughs and selective price increases. The outlook assumes an approximate 100-basis-point impact from higher tariffs related to the expiration of the generalized system of preferences (GSP) trade program, which provides duty-free treatment to goods of designated beneficiary countries, and higher global transportation costs. For the full year, the company expects its gross margin to expand by approximately 300 basis points.
	Ralph Lauren (NYSE: RL) 3Q21
Commentary	Total revenues decreased by 18% versus a 30% decline in the prior quarter. By geography, Europe experienced the deepest revenue decline, of 28% versus a 25% decline reported in the prior quarter; North America’s revenues declined by 21%, recovering strongly from a 38% decline in the prior quarter; and Asia’s revenues were up 14% versus a 7% decline in the prior quarter. The company’s global digital commerce sales surged 20%, with Europe and Asia segments reporting over 70% growth in its owned digital channels.
Outlook	For 4Q21, Ralph Lauren expects revenues to decline by approximately mid-to-high single digits, a sequential improvement from the first three quarters of the fiscal year. The outlook reflects government-mandated lockdowns and other coronavirus-related restrictions across several of its key markets, primarily in Europe and Japan. The company expects the outlook to be negatively impacted if such restrictions are extended or more severe measures are applied.
	Tapestry (NYSE: TPR) 2Q21
Commentary	Tapestry reported a 7% revenue decline, a sequential improvement the 14% decline in the prior quarter, driven by triple-digit growth in e-commerce sales, which now account for about 33% of the company’s total revenues as compared to a low-teens percentage in the year-ago quarter. By brands, revenues at Coach declined by 4% versus a 20% decline in the prior quarter; Kate Spade’s sales declined by 13% versus an 11% decline in the prior quarter; and Stuart Weitzman’s sales declined by 27% versus a 40% decline in the prior quarter. Tapestry saw strong revenue growth in Mainland China, with sales growing 35% as the company recaptured tourist demand through the duty-free channel, with consumers increasingly shifting to domestic travel. Furthermore, the company’s brands outperformed on Tmall’s Luxury Pavilion during the Singles’ Day shopping event. The company reported triple-digit e-commerce growth year over year, with e-commerce representing about 33% of global sales. The North American region saw sequential improvement over the year-ago quarter but remained pressured.
Outlook	For the full fiscal year, Tapestry expects revenues to increase at a high-single-digit rate on a 52-week basis and in the area of 10% on a 53-week basis. For the second half of the fiscal year, the company continues to expect a topline inflection and strong bottom-line growth.

REITs

	Brookfield Property Partners (NasdaqGS: BPY) 4Q20
Commentary	Total sales declined by 53.8% versus an 18.6% decline in the prior quarter. Management said that the ongoing general economic slowdown and partial shutdowns have directly impacted fourth-quarter revenues by about $13 million, of which $8 million represents lower-than-normal parking volumes while the remaining $5 million represents lower retail rents and higher credit loss reserves.  FFO (funds from operations) declined by more than 50%, in line with the prior quarter. Furthermore, the lower leasing volumes have caused occupancy on a same-store basis to fall to 90.9% in 4Q, from 92.7% in the prior quarter.
Outlook	Management said that the company continues to see improvement in mall traffic. CEO of Brookfield Properties Retail Group CEO Jared Chupaila said, “January actually closed as higher traffic overall across the portfolio since the pandemic began back in March. So, we're continuing to see a return post holiday to footfall and traffic through the centers. We're now seeing traffic north of 70% on average and continuing to grow.” Within office space, the company is hopeful of achieving the broader occupancy rates of 94–95% (versus 91% currently) in the near future, depending on the rollout of vaccines and more people returning to offices. Management said that demand for new leases or expansion remains subdued within retail as retailers are unclear about space requirements, with many looking for shorter-term renewals.

Looking Forward

The Covid-19 crisis continued to support e-commerce formats, with Amazon, Alibaba and eBay reporting strong sales growth, continuing a trend seen in the past couple of quarters. These retailers continue to invest in consumer engagement and the digital transformation of businesses. Amazon continued to prioritize sustainability by investing in renewable energy. We expect e-commerce retailers to maintain their winning streak in the next quarter, as consumers’ structural shift toward online retail continues amid the recent surges in coronavirus cases. Luxury retailers and brand owners are witnessing a mixed recovery. Canada Goose’s revenue growth turned positive for the first time since the start of the pandemic, while Tapestry’s sales declined by only a single-digit percentage. On the other hand, Capri Holdings and Ralph Lauren continued to witness double-digit declines in sales. These luxury retailers witnessed outstanding sales growth in Asia, particularly Mainland China, which remains their fastest recovering region and one of the key strategic priorities in the near future. REITs sector continued to suffer from the impacts of the Covid-19 pandemic, as many reopened centers face closures gain. Brookfield Property Partners saw its sales decline accelerate in its latest quarter (4Q20). However, the company witnessed an improvement in mall traffic in the year-to-date first quarter of fiscal 2021.