Categories Analysis, Consumer, Finance, Retail

Earnings season: How COVID-19-induced behavior benefited companies this week

PayPal is working on expanding its presence in all forms of omnichannel commerce

The effect of the COVID-19 pandemic continued into the second quarter of 2020 from the first quarter and several companies were impacted, some positively and some negatively. While many businesses witnessed disruptions to their operations leading to loss of revenue, others received a boost to their trade accompanied by a growth in revenue.

Consumer behavior underwent a massive change during this health crisis as people hoarded on food and essential supplies, moved their shopping and other transactions online, and explored more entertainment options on digital platforms as shelter-at-home mandates halted outdoor activities.

Let’s take a look at a couple of companies that reported earnings results this week and see how these changes in customer behavior proved to be tailwind for them.

Procter & Gamble

Let’s start with one of the leading consumer goods companies in the world – Procter & Gamble (NYSE: PG). P&G reported its fiscal fourth quarter 2020 earnings results on Thursday, delivering a 4% increase in net sales to $17.7 billion.  

Procter & Gamble’s quarterly results benefited from an increased focus on health and hygiene in the wake of the coronavirus outbreak, which in turn led to a huge demand for cleaning products. Within the Beauty segment, the personal cleansing division saw higher volume due to demand for cleansing and degerming products. The Grooming segment saw double-digit sales growth in appliances as more people resorted to shaving and styling at home due to salon closures.

Organic sales increased double-digits in the personal health care division which sells Vicks and Pepto-Bismol. Within the Fabric and Home Care segment, the home care division recorded a 30% increase in organic sales due to higher demand for home cleaning and dish washing products.

On the back of this strong performance, P&G has forecasted an all-in sales growth of 1-3% and an organic sales growth of 2-4% for fiscal year 2021.

eBay and Shopify

eBay (NASDAQ: EBAY) and Shopify (NYSE: SHOP) are two ecommerce companies that benefited greatly from the pandemic as more people moved to online shopping. eBay saw an 18% increase in revenues to $2.9 billion while Shopify registered a 97% growth in its top line to $714.3 million.

eBay stated that the stay-at-home mandates and a restrictive offline shopping environment brought more buyers online, helping drive an increase in total active buyers to 182 million. Gross merchandise volume (GMV) increased 26%.

Shopify saw its GMV increase 119% to $30.1 billion in the second quarter. Its merchants have adopted pickup and delivery solutions to help buyers, and have also grown their multi-channel presence with more merchants installing two or more channels to reach broader audiences.

eBay has guided for organic FX-neutral revenue growth of 14-17% for the third quarter of 2020 and 12-14% for the full year of 2020. Although Shopify believes this shift to online commerce is a trend that will continue, the company refrained from providing guidance in light of the persisting uncertainty.

PayPal

PayPal Holdings (NASDAQ: PYPL) posted a 22% growth in revenue for the second quarter of 2020 as the company witnessed a spike in digital payments amid the pandemic. The rapid shift from physical to digital across multiple industries, like retail, and the emphasis by merchants on a digital-first strategy has fueled digital payments benefiting the company.

PayPal saw a nearly 40% growth in daily active users during the quarter versus last year. On its conference call, the company stated that e-commerce penetration surpassed prior external forecasts by 3-5 years and in this environment, the demand for PayPal’s products and services has significantly increased while also paving the way for further expansion opportunities.

PayPal is focusing on several initiatives such as pushing contactless payments as the reluctance to exchange cash increases among shoppers and sellers. The company is also working on expanding its presence in all forms of omnichannel commerce such as store purchases, restaurant payments and home delivery.

PayPal expects to see revenue growth of 23% for the third quarter of 2020 and 20% for the full year of 2020.

Click here to read the full transcripts of these companies’ earnings calls

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