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Retail ETFs Mixed on Blockbuster Q2 Earnings Wave

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The overall earnings picture for the retail sector this season has been robust. Total earnings from 93.8% of the sector’s total market capitalization reported so far are up 44.6% on 14.3% higher revenues, with 91.7% beating EPS estimates and 95.8% surpassing top-line estimates. This is a much stronger showing from the retailers than what we have seen from the group in other recent periods.

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 beat on either earnings or revenues or both. However, 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

The second-largest department store retailer, Macy’s (M - Free Report) emerged as the biggest winners, skyrocketing about 24% following its earnings release. It beat earnings estimates by $1.29. Revenues breezed past the consensus estimate by $524 million. Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) jumped 11.1%, following the solid earnings announcement. It beat estimates for earnings by 26 cents and revenues by $581 million. Notably, the company delivered the ninth straight earnings beat and the sixth consecutive sales surprise.

Leading departmental store Kohl’s (KSS - Free Report) soared 10.4% following its second-quarter fiscal 2021 results. The company posted adjusted earnings of $2.48 per share, $1.18 ahead of the Zacks Consensus Estimate. Revenues of $4.4 billion came in above $4.2 billion.

On the other hand, Home Depot (HD - Free Report) , the world's largest home improvement retailer, lost 4% in response to its earnings announcement. Earnings per share of $4.53 surpassed the Zacks Consensus Estimate of $4.43 while revenues outpaced the consensus mark by $269 million.

Big-box retailer Target (TGT - Free Report) dropped 3.6% despite the earnings announcement. It topped the Zacks Consensus Estimate for earnings and revenues by 16 cents and $94 million, respectively. The company has surpassed the earnings estimates every time since the October quarter of 2018.

The world's largest retailer, Wal-Mart (WMT - Free Report) topped earnings estimates by 22 cents and revenue estimates by $4.4 billion. The robust performance was driven by strong grocery sales and back-to-school spending. Share price of WMT dipped 1.1% in response to its earnings announcement (read: Walmart Tops Q1 Earnings Estimates, Ups View: ETFs to Gain).

ETFs in Focus

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 $981 million 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 72 stocks, each accounting for less than 3.5% of the assets. IBUY charges 65 bps in annual fees and has lost 4.7% in a week.

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 107 securities in its basket with each accounting for no more than 1.7% of assets. Automotive retail, Internet & direct marketing retail, apparel 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 1.4% in a week. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Buy These 7 Amazing ETFs Trading at Low P/E Ratios).

ProShares Online Retail ETF (ONLN - Free Report)

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 25 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 American firms accounts for 74.4% share. ONLN has accumulated $883.8 million in its asset base and charges 58 bps in annual fees. It has plunged 6.9% in a week.

VanEck Vectors Retail ETF (RTH - Free Report)

This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon at 19.5% and Home Depot at 11.9% — while the other firms hold no more than 8.3% share. The product has amassed $215.9 million in its asset base and charges 35 bps in annual fees. RTH has added 0.03% in a week and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Amazon Q2 Earnings Disappoint: ETFs in Focus).

First Trust Nasdaq Retail ETF (FTXD - Free Report)

The fund follows the Nasdaq US Smart Retail Index and holds 51 stocks in its basket with each accounting for no more than 6.9% of assets. FTXD has accumulated $19 million in its asset base and has an expense ratio of 0.60%. The ETF has gained 1% in a week and carries a Zacks ETF Rank #3.