Trader Talk

Earnings: Housing is on fire, but apparel and restaurants are struggling

Key Points
  • Earnings season may appear to be going well, but beyond Big Tech and some other obvious winners, many companies are struggling.
  • As some sectors recover, apparel companies, casinos and restaurants continue to struggle.
Shake Shack, one of the many storefront businesses boarded in downtown Brooklyn over the fears of looting.
Erik McGregor | Getty Images

Just looking at the earnings for Apple, Amazon, Facebook and Google, you might get the impression that everything is going swimmingly for second- and third-quarter earnings. But that's not the case.

"We continue to see pronounced strength in software and housing-related names," said Nick Mazing, director of research at Sentieo. "On the other hand, casinos and restaurants, even formerly hot names like Shake Shack, are seeing very slow recoveries."

Apparel struggling but getting better

Columbia Sportswear Co. CEO Timothy P. Boyle said April net sales were down nearly 60% and June net sales were down 20%. In-store shopping is very anemic but online better: "Momentum in the channel remains quite strong as many consumers are still choosing to shop online rather than shop in stores."

Shake Shack: very slow improvements

CEO Randall J. Garutti: "Shack sales were down 39% compared to last year, while same-Shack sales declined 49%. However, sales showed continuous improvement through the quarter."

Housing: 'Hard to overstate how strong it is'

Redfin provides real estate brokerage services. CEO Glenn Kelman: "The housing market may be volatile, but for now, it would be hard to overstate how strong it is. For the homes listed between June 22 and July 19, asking prices increased by a whopping 14% and still buyers were undeterred. 46% of new listings had an offer within 2 weeks, up from 34% for the same period in 2019."

Realogy CEO Ryan M. Schneider notes that housing inventory is down at least 15% or more in every price band compared to a year ago. "We are seeing increased demand for suburban living in multiple geographies, driving more transactions and higher prices."

Even apartment renting is going digital

RealPage provides digital services to the real estate industry. They are leasing apartments with much fewer leasing agents in an office. CEO Stephen Winn: "COVID-19 has impacted how we think apartments are going to function in the future...We believe we can eliminate most on-site work so that a fewer number of leasing agents can work from home and be more effective than they were pre-COVID."