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The retail sector, which was on a roll ahead of the Q4 earnings, seems having trouble finding their footing in the recent week due to rounds of weak earnings report from number of large retailers. This is especially true as most of them were unable to beat estimates on either earnings or revenues and also provided downbeat guidance for the full-year.
The overall Q4 earnings picture for the retail sector has deccelarated somewhat from the prior quarters. Total earnings from 96.8% of the sector’s total market capitalization reported so far are down 30.8% on 6.1% higher revenues, with 75.9% beating EPS estimates and 65.5% beating revenue estimates. Though both the earnings and revenue surprise is better than the prior two quarters, growth rates are on declining trend.
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates but issued a weaker-than-expected outlook for the full year. Earnings per share came in at $1.71, outpacing the Zacks Consensus Estimate of $1.52 and improving 11.8% from the year-ago earnings. Revenues rose 7.3% year over year to $164 billion and topped the consensus mark of $159.7 billion. The world's biggest retailer expects earnings per share in the range of $5.90-$6.05 for fiscal 2024, much lower than the Zacks Consensus Estimate of $6.49 (read: Walmart Beats on Q4 Earnings, Guides Lower: ETFs in Focus).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, reported mixed results. Earnings per share of $3.30 surpassed the Zacks Consensus Estimate by 4 cents but revenues missed the same by $98 million. The retailer expects 2023 sales to be approximately the same as in 2022 and earnings per share to drop by a mid-single-digit percentage.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 7 cents but missed on revenues by $257 million. It issued guidance for revenue of $88-$90 billion for fiscal 2023 and earnings per share guidance of $13.60-$14.00.
Big-box retailer, Target (TGT - Free Report) , topped the Zacks Consensus Estimate for earnings by 50 cents and surpassed revenue estimates by $703 million. For fiscal 2023, the company expects adjusted earnings per share guidance to be in the range of $7.75 to $8.75.
Leading departmental store Kohl’s (KSS - Free Report) came up with dismal results. Kohl’s posted adjusted loss of $2.49 per share against the Zacks Consensus Estimate of $1.03. Revenues of $6.02 billion also came below the consensus mark of $6.22 billion.
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 94 stocks in its basket, with none making up for more than 2.1% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, apparel 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 $382.4 million and an average trading volume of 5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 (Strong 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 firm with double-digit exposure each, while the other firms hold no more than 8% share.
VanEck Vectors Retail ETF has amassed $147.2 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 5,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETF Areas to Win on Upbeat January 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 58 stocks in its basket, with none accounting for more than 3.6% of assets. Amplify Online Retail ETF has the largest allocation of 49% in the online retail and 39% in marketplace.
Amplify Online Retail ETF has attracted $203.1 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 49,000 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 25 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.7% of assets. American firms make up 65.8% of the portfolio, while Chinese firms account for 25% share.
ProShares Online Retail ETF has accumulated $108.7 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 99,000 shares.
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Retail ETFs Losing Shine Post Q4 Earnings
The retail sector, which was on a roll ahead of the Q4 earnings, seems having trouble finding their footing in the recent week due to rounds of weak earnings report from number of large retailers. This is especially true as most of them were unable to beat estimates on either earnings or revenues and also provided downbeat guidance for the full-year.
The overall Q4 earnings picture for the retail sector has deccelarated somewhat from the prior quarters. Total earnings from 96.8% of the sector’s total market capitalization reported so far are down 30.8% on 6.1% higher revenues, with 75.9% beating EPS estimates and 65.5% beating revenue estimates. Though both the earnings and revenue surprise is better than the prior two quarters, growth rates are on declining trend.
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) have lost 1.9%, 2.1% and 3%, 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
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates but issued a weaker-than-expected outlook for the full year. Earnings per share came in at $1.71, outpacing the Zacks Consensus Estimate of $1.52 and improving 11.8% from the year-ago earnings. Revenues rose 7.3% year over year to $164 billion and topped the consensus mark of $159.7 billion. The world's biggest retailer expects earnings per share in the range of $5.90-$6.05 for fiscal 2024, much lower than the Zacks Consensus Estimate of $6.49 (read: Walmart Beats on Q4 Earnings, Guides Lower: ETFs in Focus).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, reported mixed results. Earnings per share of $3.30 surpassed the Zacks Consensus Estimate by 4 cents but revenues missed the same by $98 million. The retailer expects 2023 sales to be approximately the same as in 2022 and earnings per share to drop by a mid-single-digit percentage.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 7 cents but missed on revenues by $257 million. It issued guidance for revenue of $88-$90 billion for fiscal 2023 and earnings per share guidance of $13.60-$14.00.
Big-box retailer, Target (TGT - Free Report) , topped the Zacks Consensus Estimate for earnings by 50 cents and surpassed revenue estimates by $703 million. For fiscal 2023, the company expects adjusted earnings per share guidance to be in the range of $7.75 to $8.75.
Leading departmental store Kohl’s (KSS - Free Report) came up with dismal results. Kohl’s posted adjusted loss of $2.49 per share against the Zacks Consensus Estimate of $1.03. Revenues of $6.02 billion also came below the consensus mark of $6.22 billion.
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 94 stocks in its basket, with none making up for more than 2.1% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, apparel 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 $382.4 million and an average trading volume of 5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 (Strong 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 firm with double-digit exposure each, while the other firms hold no more than 8% share.
VanEck Vectors Retail ETF has amassed $147.2 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 5,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETF Areas to Win on Upbeat January 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 58 stocks in its basket, with none accounting for more than 3.6% of assets. Amplify Online Retail ETF has the largest allocation of 49% in the online retail and 39% in marketplace.
Amplify Online Retail ETF has attracted $203.1 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 49,000 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 25 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.7% of assets. American firms make up 65.8% of the portfolio, while Chinese firms account for 25% share.
ProShares Online Retail ETF has accumulated $108.7 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 99,000 shares.