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Retail Sales Declined More Than Expected

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New Retail Sales numbers for July were released before the bell this Tuesday, posting a big drop from expectations and month over month: -1.1% was almost 4x worse than the -0.3% expected. This follows the upwardly revised +0.7% from June. It also shows that, despite a mostly robust Great Reopening, monthly Retail Sales numbers have been in negative territory 3 of the past 6 months.

Subtracting volatile auto sales for the month, this number moves to -0.4%, twice as low as expected. Minus gasoline prices, we’re -1.4%. The Control number, which gets plugged into a high amount of other economic reads, was also lower than expected, -1%. From here, it would look like the very hot auto market — both for new and used vehicles — has cooled off. But is this still part of supply constraints issues that have kept new cars in limited inventory, or a slowing down of demand?

We also may wish to consider whether the Delta variant of Covid-19, which began to generate a legit fourth wave of the coronavirus last month, has anything to do with falling Retail Sales numbers. Certain regions in the country — including the South/Southeast — which had been growing at a faster economic clip, are now also in the throes of this fourth wave. This would necessarily dampen retail demand.

Speaking of retail, Walmart (WMT - Free Report) easily took out estimates on both top and bottom lines this morning, posting $1.78 per share (well ahead of the $1.56 expected) on $141.05 billion in sales, which swung to a positive from expectations by 2.4%. This represents the highest quarter of revenue not associated with holiday season in the company’s history. Yet shares dropped 1% on the news before turning positive a half-hour before the market open.

While same-store sales rose 5.2%, higher than the 3.3% analysts were looking for, a big slow-down in e-commerce sales for the quarter has made investors take notice: only 6% growth in e-commerce in Q2 was an extreme slowing from the 90%+ e-commerce growth we saw during the height of the pandemic. That said, full-year earnings guidance has been raised to $6.20-6.35 per share; the Zacks consensus had been expecting $6.00.

Home Depot (HD - Free Report) also outperformed expectations on both top and bottom lines: $4.53 per share on $41.12 billion surpassed the $4.43 per share and $40.71 billion, representing double-digit earnings growth and increased revenues by 8.1%. Same-store sales disappointed a bit at +4.5% on a -5.8% drop in customer transactions, though the average receipt grew 11.3% on higher costs. Shares are -3.3% on the news.

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