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String of Q2 Earnings Beat Fails to Lift Retail ETFs
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The overall Q2 earnings picture for the retail sector has been good so far. Total earnings from 96.3% of the sector’s total market capitalization reported so far are up 23.9% on 5.5% higher revenues, with 78.6% beating EPS estimates and 57.1% beating revenue estimates. The EPS beat percentage is below the preceding quarter but above the historical average while the revenue beat percentage is tracking below the recent periods.
Most of the big-box retailers came up with an earnings or revenue beat or both. However, the robust results failed to fuel a rally in retail ETFs amid the market weakness. VanEck Vectors Retail ETF (RTH - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) , SPDR S&P Retail ETF (XRT - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) have lost 1.4%, 2.3%, 3.5%, and 2.5% respectively, over the past week (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates and raised its outlook for the full year. Earnings per share came in at $1.84, outpacing the Zacks Consensus Estimate of $1.69 and improving 4% from the year-ago earnings. Revenues rose 5.7% year over year to $161.6 billion and topped the consensus mark of $159.8 billion. U.S. comparable sales grew 6.4%. The mega-retailer lifted fiscal 2024 guidance. It now expects revenues to rise 4-4.5% compared with the previous projection of 3.5% and earnings per share in the range of $6.36-$6.46, up from $6.10-$6.20. For third-quarter fiscal 2024, Walmart expects sales to grow 3% and adjusted earnings per share in the range of $1.45-$1.50 (read: ETFs to Bet on as Walmart Beats Q2 Earnings Estimates).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, reported solid results. Earnings per share of $4.65 surpassed the Zacks Consensus Estimate by 19 cents and revenues exceeded by $668 million. The retailer reiterated its revenue and earnings view for fiscal 2023. It expects sales to decline 2-5% year over year and earnings per share to drop 7-13%.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 7 cents and for revenues by $20 million. It also maintained its revenue and earnings per share guidance for fiscal 2023. Revenues are expected in the range of $87-$89 billion and earnings per share are expected to be in the range of $13.20-$13.60.
Big-box retailer, Target (TGT - Free Report) topped the Zacks Consensus Estimate for earnings by 39 cents but missed on revenues by $483 million. In fact, the retailer posted its first quarterly sales decline in six years. For fiscal 2023, Target slashed its earnings forecast to $7-$8 per share from $7.75-$8.75 and expects comparable sales to decline by mid-single-digits.
Leading departmental store Kohl’s (KSS - Free Report) came up with mixed results. Kohl’s posted earnings of 52 cents per share, beating the Zacks Consensus Estimate of 24 cents. Revenues of $3.9 billion came in slightly below the consensus mark by $9 million. Kohl’s reiterated its guidance for the full-year 2023 with a sales decline of 2-4% and earnings per share of $2.10-$2.70.
VanEck Vectors Retail ETF provides exposure to the 26 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, while the other firms hold no more than a 9.4% share (read: ETF Areas & Stocks to Win on Upbeat July Retail Sales).
VanEck Vectors Retail ETF has amassed $153 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 5,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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 77 stocks in its basket, with none accounting for more than 3.6% of the assets. Amplify Online Retail ETF has the largest allocation of 42% in online retail and 37% in the marketplace.
Amplify Online Retail ETF has attracted $201 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 43,000 shares.
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 79 stocks in its basket, with none making up for more than 3% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty stores, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $347 million and an average trading volume of 4.7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels, and then zeroes in on companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.8% of the assets. American firms make up 60% of the portfolio, while Chinese firms account for a 18.8% share (read: 5 ETFs to Profit from Amazon's Q2 Earnings Beat).
ProShares Online Retail ETF has accumulated $95.1 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 18,000 shares.
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String of Q2 Earnings Beat Fails to Lift Retail ETFs
The overall Q2 earnings picture for the retail sector has been good so far. Total earnings from 96.3% of the sector’s total market capitalization reported so far are up 23.9% on 5.5% higher revenues, with 78.6% beating EPS estimates and 57.1% beating revenue estimates. The EPS beat percentage is below the preceding quarter but above the historical average while the revenue beat percentage is tracking below the recent periods.
Most of the big-box retailers came up with an earnings or revenue beat or both. However, the robust results failed to fuel a rally in retail ETFs amid the market weakness. VanEck Vectors Retail ETF (RTH - Free Report) , Amplify Online Retail ETF (IBUY - Free Report) , SPDR S&P Retail ETF (XRT - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) have lost 1.4%, 2.3%, 3.5%, and 2.5% respectively, over the past week (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart (WMT - Free Report) surpassed both earnings and revenue estimates and raised its outlook for the full year. Earnings per share came in at $1.84, outpacing the Zacks Consensus Estimate of $1.69 and improving 4% from the year-ago earnings. Revenues rose 5.7% year over year to $161.6 billion and topped the consensus mark of $159.8 billion. U.S. comparable sales grew 6.4%. The mega-retailer lifted fiscal 2024 guidance. It now expects revenues to rise 4-4.5% compared with the previous projection of 3.5% and earnings per share in the range of $6.36-$6.46, up from $6.10-$6.20. For third-quarter fiscal 2024, Walmart expects sales to grow 3% and adjusted earnings per share in the range of $1.45-$1.50 (read: ETFs to Bet on as Walmart Beats Q2 Earnings Estimates).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, reported solid results. Earnings per share of $4.65 surpassed the Zacks Consensus Estimate by 19 cents and revenues exceeded by $668 million. The retailer reiterated its revenue and earnings view for fiscal 2023. It expects sales to decline 2-5% year over year and earnings per share to drop 7-13%.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 7 cents and for revenues by $20 million. It also maintained its revenue and earnings per share guidance for fiscal 2023. Revenues are expected in the range of $87-$89 billion and earnings per share are expected to be in the range of $13.20-$13.60.
Big-box retailer, Target (TGT - Free Report) topped the Zacks Consensus Estimate for earnings by 39 cents but missed on revenues by $483 million. In fact, the retailer posted its first quarterly sales decline in six years. For fiscal 2023, Target slashed its earnings forecast to $7-$8 per share from $7.75-$8.75 and expects comparable sales to decline by mid-single-digits.
Leading departmental store Kohl’s (KSS - Free Report) came up with mixed results. Kohl’s posted earnings of 52 cents per share, beating the Zacks Consensus Estimate of 24 cents. Revenues of $3.9 billion came in slightly below the consensus mark by $9 million. Kohl’s reiterated its guidance for the full-year 2023 with a sales decline of 2-4% and earnings per share of $2.10-$2.70.
ETFs in Focus
Below, we have highlighted the ETFs in detail:
VanEck Vectors Retail ETF (RTH - Free Report)
VanEck Vectors Retail ETF provides exposure to the 26 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, while the other firms hold no more than a 9.4% share (read: ETF Areas & Stocks to Win on Upbeat July Retail Sales).
VanEck Vectors Retail ETF has amassed $153 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 5,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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 77 stocks in its basket, with none accounting for more than 3.6% of the assets. Amplify Online Retail ETF has the largest allocation of 42% in online retail and 37% in the marketplace.
Amplify Online Retail ETF has attracted $201 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 43,000 shares.
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 79 stocks in its basket, with none making up for more than 3% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty stores, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $347 million and an average trading volume of 4.7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
ProShares Online Retail ETF (ONLN - Free Report)
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels, and then zeroes in on companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.8% of the assets. American firms make up 60% of the portfolio, while Chinese firms account for a 18.8% share (read: 5 ETFs to Profit from Amazon's Q2 Earnings Beat).
ProShares Online Retail ETF has accumulated $95.1 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 18,000 shares.