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Retail ETFs in Focus Post Q1 Earnings

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The overall earnings picture for the retail sector this season has been solid. Total earnings from 64.7% of the sector’s total market capitalization reported so far are up 61.2% on 12.7% higher revenues, with 90.9% beating EPS estimates and 81.8% beating top-line estimates. The growth pace and earnings surprise are well above the four-quarter average while the revenue beat is slightly lower than the four-quarter average.

Robust earnings were driven by cheap money, rapid COVID-19 vaccination and business re-openings that spurred consumer spending, leading to an increase in retail sales. As such, most of the traditional brick-and-mortar retailers came up with stronger-than-expected results with a both a top and bottom-line beat though a few lost in terms of share value (see: all the Consumer Discretionary ETFs here).  

Let’s dig into the details of some of the earnings releases.

Earnings in Focus

Big-box retailer Target (TGT - Free Report) jumped 7.4% following the earnings announcement. It topped the Zacks Consensus Estimate for earnings and revenues by $1.43 and $1.9 billion, respectively. The company has surpassed earnings estimates every time since the October quarter of 2018.

On the other hand, the world's largest retailer, Wal-Mart (WMT - Free Report) topped earnings estimates by 47 cents and revenue estimates by $7 billion. While the solid trend toward online shopping is expected to continue, demand at brick-and-mortar stores will also rise as more Americans get vaccinated and move freely. Share price of WMT rose 2.2% in response to its earnings announcement (read: Walmart Smashes Q1 Earnings Estimates, Ups View: ETFs to Gain).

The second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 63 cents and revenues by $763 million. The stock inched up 0.3% in response to its earnings announcement. Meanwhile, shares of Home Depot (HD - Free Report) , the world's largest home improvement retailer, plunged 1.7% in response to its earnings announcement. Earnings per share of $3.86 surpassed the Zacks Consensus Estimate of $3.04 while revenues outpaced the consensus mark by $2.6 billion.

One of the leading departmental stores, Kohl’s (KSS - Free Report) lost the most. The stock has dropped 10.3% following its first-quarter fiscal 2021 results. The company posted adjusted earnings of $1.05 per share. The Zacks Consensus Estimate was pegged at a break-even. Revenues of $3.89 billion came in above the Zacks Consensus Estimate of $3.57 billion. The second-largest department store retailer, Macy’s (M - Free Report) also saw a decline of 2% in its stock price following its earnings release. It beat earnings estimates by 80 cents. Revenues breezed past the consensus estimate by $248 million.

ETFs in Focus

That said, a slew of robust results led to mixed trading in the retail space and ETFs from a one-week look. Below we have highlighted five ETFs in detail:  

Amplify Online Retail ETF (IBUY - Free Report)

This ETF has attracted $1.3 billion to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 74 stocks, each accounting for less than 2.4% of the assets. IBUY charges 65 bps in annual fees and has gained 4.3% in a week (read: Likely Capital Gain Tax Hike a Buying Point for These ETFs?).

SPDR S&P Retail ETF (XRT - Free Report)

With AUM of $1.1 billion, this product tracks the S&P Retail Select Industry Index, holding 101 securities in its basket with each accounting for no more than 1.5% of assets. Apparel retail, Internet & direct marketing retail, automotive retail and specialty stores are the top four sectors with a double-digit allocation each. The fund charges 35 bps in annual fees and has shed 3.3% in a week. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 All-Star ETFs & Stocks to Buy on the Dip).

ProShares Online Retail ETF ONLN

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket with the highest concentration on the top firm — Amazon (AMZN - Free Report) . American firms make up three-fourth of the portfolio, while China accounts for 18.2% share. ONLN has accumulated $1 billion in its asset base and charges 58 bps in annual fees. It has added 2.3% in a week.

VanEck Vectors Retail ETF (RTH - Free Report)

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon at 19.2% and Home Depot at 12.4% — while the other firms hold no more than 8.5% share. The product has amassed $223.3 million in its asset base and charges 35 bps in annual fees. RTH has shed 0.7% in a week and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

First Trust Nasdaq Retail ETF

The fund follows the Nasdaq US Smart Retail Index and holds 50 stocks in its basket. It is concentrated on the top firm GameStop (GME - Free Report) at 11.2% while the other firms account for no more than 7.9% of the basket. FTXD has accumulated $8.1 million in its asset base and has an expense ratio of 0.60%. The ETF has shed 1.4% in a week and carries a Zacks ETF Rank #3 (read: Q1 Earnings Effect: 5 Must-Watch ETF Charts).

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