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The overall picture for the retail sector in Q2 earnings has been disappointing, raising questions about the economic health of consumers in the current inflationary environment. Total earnings from 93.9% of the sector’s total market capitalization reported so far are down 21.4% on 7.9% higher revenues, with 72% beating EPS estimates and 44% beating revenue estimates.
Notably, the revenue beat ratio is the lowest in the last five years. Most of the retailers beat estimates on both fronts but slashed the full-year outlook as consumers cut back on spending. As such, SPDR S&P Retail ETF (XRT - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) are down 5.9%, 2.7%, 11.3% and 11%, respectively, over the past week (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
The second-largest department store retailer, Macy’s (M - Free Report) topped earnings and revenue estimates. It beat earnings estimates by 15 cents and revenues by $119 million. Macy’s now expects revenues in the range of $24.34-$24.58 billion, down from $24.46-$24.70 billion. Earnings per share has been lowered to $4.00-$4.20 from the prior guidance of $4.53-$4.95.
Leading departmental store Kohl’s (KSS - Free Report) also came up with upbeat results but a dismal outlook. Kohl’s posted adjusted earnings of $1.18 per share, outpacing the Zacks Consensus Estimate by 3 cents. Revenues of $4.09 billion edged past the consensus mark of $4.07 billion. The retailer expects net sales to decline 5-6% as compared to the previous projection of flat to 1%. It cut its earnings per share outlook in half to $2.80-$3.20 from $6.45-$6.85.
Home Depot (HD - Free Report) , the world's largest home improvement retailer, topped estimates. Earnings per share of $5.05 surpassed the Zacks Consensus Estimate by 10 cents and revenues outpaced the same by $446 million. The retailer reaffirmed the fiscal 2022 guidance of approximately 3% for sales growth and mid-single-digit percentage range earnings per share. Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 4 cents but missed revenues by $719 million. It continues to expect sales of $97-$99 billion for full-year 2022 and earnings per share of $13.10-$13.60.
Big-box retailer, Target (TGT - Free Report) , lagged the Zacks Consensus Estimate for earnings by 32 cents and revenues by $122 million. For full-year 2022, the company continues to expect low-to-mid single-digit revenue growth.
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates and lifted its full-year profit outlook. Earnings per share came in at $1.77, outpacing the Zacks Consensus Estimate of $1.60. Revenues of $152.9 billion topped the consensus mark of $151.4 billion. The world's biggest retailer expects earnings per share to drop around 9-11% for the full fiscal year, better than the late-July projection of a decline of 11-13% (read: ETFs Jump on Walmart Q2 Earnings Beat).
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 100 stocks in its basket, with none making up for more than 1.7% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty stores, and Internet & direct marketing retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $408.9 million and an average trading volume of 4.7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
VanEck Vectors Retail ETF provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top two firms with double-digit exposure each, while the other firms hold no more than 8% share.
VanEck Vectors Retail ETF has amassed $173.9 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 9,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs & Stocks to Win Despite a Stagnant July Retail Sales).
Amplify Online Retail ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. IBUY holds 75 stocks in its basket, with none accounting for more than 2.9% of assets. Amplify Online Retail ETF has the largest allocation in traditional retail at 47% followed by 43% in the marketplace.
Amplify Online Retail ETF has attracted $261.1 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 47,000 shares.
ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeros in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 4.7% of assets. American firms make up three-fourth of the portfolio, while Chinese firms account for 17% share.
ProShares Online Retail ETF has accumulated $296.5 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 88,000 shares.
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Retailers Q2 Earnings Disappoint: ETFs in Focus
The overall picture for the retail sector in Q2 earnings has been disappointing, raising questions about the economic health of consumers in the current inflationary environment. Total earnings from 93.9% of the sector’s total market capitalization reported so far are down 21.4% on 7.9% higher revenues, with 72% beating EPS estimates and 44% beating revenue estimates.
Notably, the revenue beat ratio is the lowest in the last five years. Most of the retailers beat estimates on both fronts but slashed the full-year outlook as consumers cut back on spending. As such, SPDR S&P Retail ETF (XRT - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) are down 5.9%, 2.7%, 11.3% and 11%, respectively, over the past week (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
The second-largest department store retailer, Macy’s (M - Free Report) topped earnings and revenue estimates. It beat earnings estimates by 15 cents and revenues by $119 million. Macy’s now expects revenues in the range of $24.34-$24.58 billion, down from $24.46-$24.70 billion. Earnings per share has been lowered to $4.00-$4.20 from the prior guidance of $4.53-$4.95.
Leading departmental store Kohl’s (KSS - Free Report) also came up with upbeat results but a dismal outlook. Kohl’s posted adjusted earnings of $1.18 per share, outpacing the Zacks Consensus Estimate by 3 cents. Revenues of $4.09 billion edged past the consensus mark of $4.07 billion. The retailer expects net sales to decline 5-6% as compared to the previous projection of flat to 1%. It cut its earnings per share outlook in half to $2.80-$3.20 from $6.45-$6.85.
Home Depot (HD - Free Report) , the world's largest home improvement retailer, topped estimates. Earnings per share of $5.05 surpassed the Zacks Consensus Estimate by 10 cents and revenues outpaced the same by $446 million. The retailer reaffirmed the fiscal 2022 guidance of approximately 3% for sales growth and mid-single-digit percentage range earnings per share.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 4 cents but missed revenues by $719 million. It continues to expect sales of $97-$99 billion for full-year 2022 and earnings per share of $13.10-$13.60.
Big-box retailer, Target (TGT - Free Report) , lagged the Zacks Consensus Estimate for earnings by 32 cents and revenues by $122 million. For full-year 2022, the company continues to expect low-to-mid single-digit revenue growth.
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates and lifted its full-year profit outlook. Earnings per share came in at $1.77, outpacing the Zacks Consensus Estimate of $1.60. Revenues of $152.9 billion topped the consensus mark of $151.4 billion. The world's biggest retailer expects earnings per share to drop around 9-11% for the full fiscal year, better than the late-July projection of a decline of 11-13% (read: ETFs Jump on Walmart Q2 Earnings Beat).
ETFs in Focus
Below, we have highlighted the ETFs in detail:
SPDR S&P Retail ETF (XRT - Free Report)
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 100 stocks in its basket, with none making up for more than 1.7% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty stores, and Internet & direct marketing retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $408.9 million and an average trading volume of 4.7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
VanEck Vectors Retail ETF (RTH - Free Report)
VanEck Vectors Retail ETF provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top two firms with double-digit exposure each, while the other firms hold no more than 8% share.
VanEck Vectors Retail ETF has amassed $173.9 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 9,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs & Stocks to Win Despite a Stagnant July Retail Sales).
Amplify Online Retail ETF (IBUY - Free Report)
Amplify Online Retail ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. IBUY holds 75 stocks in its basket, with none accounting for more than 2.9% of assets. Amplify Online Retail ETF has the largest allocation in traditional retail at 47% followed by 43% in the marketplace.
Amplify Online Retail ETF has attracted $261.1 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 47,000 shares.
ProShares Online Retail ETF (ONLN - Free Report)
ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeros in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 4.7% of assets. American firms make up three-fourth of the portfolio, while Chinese firms account for 17% share.
ProShares Online Retail ETF has accumulated $296.5 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 88,000 shares.