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Retail Sales Improve Overall; WMT & HD Move Different Directions

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Tuesday, May 17, 2022

Retail Sales for the month of April are out this morning, and the results are mostly quite positive: +0.9% on the headline figure was a smidge below the +1.0% expected, marking the fourth-straight month higher for retailers (although the margins are dwindling notably month to month). But the revision to March nearly tripled from +0.5% originally reported to +1.4% this morning.

Stripping out expensive vehicle sales, this number looks even better: +0.6% versus +0.4% anticipated, down from the upwardly revised +2.1% the previous month. In this metric, the “core” read strips out both auto and gasoline sales, which rose +1% versus expectations of +0.75%. The Control number (which informs other economic calculations elsewhere) reached +1.0%, 30 basis points higher than the +0.7% expected — the second-highest print of the year so far.

So we’re seeing consumer spending strength, even faced with strong headwinds for goods, particularly gasoline. This is good news overall, because it reduces the risks associated with inflation as long as the consumer is able to take on higher prices. Pre-market futures have stayed strongly in the green following this Retail Sales report.

Meanwhile, we see a tale of two retailers ahead of today’s opening bell: Home Depot (HD - Free Report) beat expectations on both top and bottom lines, with earnings of $4.09 per share easily above the $3.86 in the Zacks consensus and the $3.66 per share in the year-ago quarter. But Walmart (WMT - Free Report) missed expectations by -11% on its bottom line, with earnings of $1.30 per share versus $1.46 estimate and $1.69 per share in the year-ago quarter.

Both retailers beat top-line estimates, and both saw comps rise in the quarter. But issues with inventories and overstaffing sandbagged Walmart’s Q1, sending its shares down -6% ahead of the bell, swinging to a negative stock performance year to date. Home Depot, on the other hand, has gained +4.5% on the news (though is still down big year to date).

For more on WMT’s earnings, click here.
For more on HD’s earnings, click here.

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