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The overall earnings picture for the retail sector in Q1 earnings has been disappointing, raising questions about the health of the consumer in the current inflationary environment. Total earnings from 95.9% of the sector’s total market capitalization reported so far are down 19.6% on 6.5% higher revenues, with 60.0% beating EPS estimates and 70.0% beating revenue estimates.
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) topped earnings and revenue estimates. It beat earnings estimates by 26 cents and revenues by $3 million. Macy’s continues to expect sales in the range of $24.46-$24.70 billion and raised its adjusted earnings per share guidance to $4.53-$4.95 from the prior projection of $4.13-$4.52 per share.
Leading departmental store Kohl’s (KSS - Free Report) came up with a dismal earnings report. Kohl’s posted adjusted earnings of 11 cents per share, missing the Zacks Consensus Estimate by 64 cents. Revenues of $3.71 billion fell short of the consensus mark of $3.85 billion. The retailer lowered its guidance for full-year 2022. It now expects net sales growth of flat to 1%, down from the previous projection of 2-3% growth. The earnings per share outlook was reduced to $6.45-$6.85 from $7.00-$7.50.
Home Depot (HD - Free Report) , the world's largest home improvement retailer, topped estimates. Earnings per share of $4.09 surpassed the Zacks Consensus Estimate by 42 cents and revenues outpaced the same by $2.4 billion. The retailer raised the 2022 guidance for sales growth to 3% from the previous forecast of slight positive growth. It also expects earnings per share to rise in the mid-single-digit percentage range, up from the previous forecast of low-single-digit percentage growth. Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 27 cents but missed revenues by $73 million. It anticipates sales of $97-$99 billion for full-year 2022 and earnings per share of $13.10-$13.60.
Big-box retailer, Target (TGT - Free Report) , lagged the Zacks Consensus Estimate for earnings by 81 cents but exceeded revenues by $642 million, respectively. For full-year 2022, the company continues to expect low-to-mid single-digit revenue growth.
Walmart (WMT - Free Report) also missed on revenues but beat on revenue estimates. Earnings per share came in at $1.30, missing the Zacks Consensus Estimate of $1.46. Revenues of $141.57 billion topped the consensus mark of $138.3 billion. The world's biggest retailer expects earnings per share to fall about 1% in fiscal 2023, rather than rise by mid-single digits as expected earlier (read: Walmart Slumps on Q1 Earnings Miss: ETFs in Focus).
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 108 stocks in its basket, with none making up for more than 1.5% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, Internet & direct marketing retail, and specialty stores (read: Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most).
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $405.1 million and an average trading volume of 6.1 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 9.5% share.
VanEck Vectors Retail ETF has amassed $145.1 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 18,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs & Stocks to Win on Uptick in April 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 74 stocks in its basket, with none accounting for more than 2.5% of assets. Amplify Online Retail ETF has the largest allocation in traditional retail at 49.5% followed by 36.9% in the marketplace.
Amplify Online Retail ETF has attracted $229 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 63,000 shares.
ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeroing in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms while other firms hold no more than 5.1% of assets. American firms make up three-fourth of the portfolio, while Chinese firms account for 17% share.
ProShares Online Retail ETF has accumulated $278.2 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 91,000 shares.
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Wave of Dismal Q1 Earnings Drags Retail ETFs Down
The overall earnings picture for the retail sector in Q1 earnings has been disappointing, raising questions about the health of the consumer in the current inflationary environment. Total earnings from 95.9% of the sector’s total market capitalization reported so far are down 19.6% on 6.5% higher revenues, with 60.0% beating EPS estimates and 70.0% beating revenue estimates.
The EPS beat percentage is the lowest since 53.8% reported in Q4 of 2018 and the second-lowest in the last five years. 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) are in focus (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) topped earnings and revenue estimates. It beat earnings estimates by 26 cents and revenues by $3 million. Macy’s continues to expect sales in the range of $24.46-$24.70 billion and raised its adjusted earnings per share guidance to $4.53-$4.95 from the prior projection of $4.13-$4.52 per share.
Leading departmental store Kohl’s (KSS - Free Report) came up with a dismal earnings report. Kohl’s posted adjusted earnings of 11 cents per share, missing the Zacks Consensus Estimate by 64 cents. Revenues of $3.71 billion fell short of the consensus mark of $3.85 billion. The retailer lowered its guidance for full-year 2022. It now expects net sales growth of flat to 1%, down from the previous projection of 2-3% growth. The earnings per share outlook was reduced to $6.45-$6.85 from $7.00-$7.50.
Home Depot (HD - Free Report) , the world's largest home improvement retailer, topped estimates. Earnings per share of $4.09 surpassed the Zacks Consensus Estimate by 42 cents and revenues outpaced the same by $2.4 billion. The retailer raised the 2022 guidance for sales growth to 3% from the previous forecast of slight positive growth. It also expects earnings per share to rise in the mid-single-digit percentage range, up from the previous forecast of low-single-digit percentage growth. Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 27 cents but missed revenues by $73 million. It anticipates sales of $97-$99 billion for full-year 2022 and earnings per share of $13.10-$13.60.
Big-box retailer, Target (TGT - Free Report) , lagged the Zacks Consensus Estimate for earnings by 81 cents but exceeded revenues by $642 million, respectively. For full-year 2022, the company continues to expect low-to-mid single-digit revenue growth.
Walmart (WMT - Free Report) also missed on revenues but beat on revenue estimates. Earnings per share came in at $1.30, missing the Zacks Consensus Estimate of $1.46. Revenues of $141.57 billion topped the consensus mark of $138.3 billion. The world's biggest retailer expects earnings per share to fall about 1% in fiscal 2023, rather than rise by mid-single digits as expected earlier (read: Walmart Slumps on Q1 Earnings Miss: ETFs in Focus).
ETFs in Focus
Below we have highlighted 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 108 stocks in its basket, with none making up for more than 1.5% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, Internet & direct marketing retail, and specialty stores (read: Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most).
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $405.1 million and an average trading volume of 6.1 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 9.5% share.
VanEck Vectors Retail ETF has amassed $145.1 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 18,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs & Stocks to Win on Uptick in April 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 74 stocks in its basket, with none accounting for more than 2.5% of assets. Amplify Online Retail ETF has the largest allocation in traditional retail at 49.5% followed by 36.9% in the marketplace.
Amplify Online Retail ETF has attracted $229 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 63,000 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 zeroing in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms while other firms hold no more than 5.1% of assets. American firms make up three-fourth of the portfolio, while Chinese firms account for 17% share.
ProShares Online Retail ETF has accumulated $278.2 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 91,000 shares.