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Wal-Mart's Dismal Q4 Results Drag Consumer Staples ETFs Down
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Wal-Mart (WMT - Free Report) reported lackluster fourth-quarter fiscal 2018 results. The mega retailer’s nine-quarter long positive earnings surprise streak came to an end as it recorded slower growth in online sales. This dampened investors’ spirit, leading to the steepest share decline in three decades.
Q4 Performance
Earnings per share came in at $1.33, missing the Zacks Consensus Estimate by 3 cents but improving from the year-ago earnings of $1.36. Revenues increased 4.1% year over year to $136.3 billion and were ahead of the consensus mark of $135 billion.
Though same-store sales grew for the fourteenth consecutive quarter, climbing 2.6% year over year, slowdown in e-commerce sales growth was a major disappointment. Online sales grew just 23% year over year, a massive drop from 50% growth seen in the third quarter and 29% growth in the year-ago quarter. This is because Wal-Mart struggled to manage its online inventory, amassing holiday-related items such as electronics, toys and gifts and falling short of stocking everyday items (read: Will Wal-Mart ETFs Outdo Amazon in Last-Minute Shopping?).
Despite the slowdown in e-commerce sales, the discount chain is still optimistic as it reiterated its prior guidance of 40% online sales growth for the current fiscal. Additionally, it expects U.S. same-store sales to grow at least 2% and earnings per share in the range of $4.75-$5.00. The midpoint of the guidance is below the Zacks Consensus Estimate of $4.91.
Market Impact
The earnings miss and the dismal online sales pushed Wal-Mart shares down by more than 10% on the day. This represents its steepest one-day drop since Jan 8,1988 and wiped out more than $31 billion in the company’s market value. Meanwhile, WMT crushed the volume figure as nearly 52.1 million shares exchanged hands compared with around 9 million on an average.
Wal-Mart has been underperforming the industry, having shed 4.7% so far this year against the latter’s 5.6% increase. It carries a Zacks Rank #2 (Buy) and a VGM Score of A. The stock belongs to a top-ranked Zacks industry (top 41%), suggesting that the beaten down prices could be a good entry point.
Consequently, ETFs having the highest allocation to the world's largest brick and mortar retailer will be in focus in the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises. These ETFs have seen rough trading following Wal-Mart’s results.
This fund targets companies that have the potential to outperform the broader U.S. consumer staples sector and tracks the MSCI USA Consumer Staples Diversified Multiple-Factor Capped Index. Holding 28 stocks in its basket, Wal-Mart takes the top spot, accounting for 10.3% of the portfolio. In terms of industrial exposure, about 54.4% of the portfolio is dominated by food, beverage and tobacco while household and personal product, and food & staples retailing take the remainder with a double-digit exposure each. CNSF has attracted $2.6 million in its asset base and trades in a meager volume of about 1000 shares. It charges 35 bps in fees per year and has shed 1.8% following Wal-Mart results. It has a Zacks ETF Rank #5 (Strong Sell).
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
This is the most popular consumer staples ETF with AUM of $7.5 billion and follows the Consumer Staples Select Sector Index. The fund charges 13 bps in fees per year from investors and trades in heavy volume of nearly 11.9 million shares a day. In total, the fund holds about 34 securities in its basket with Wal-Mart taking the fifth spot at 8.4%. From a sector look, beverages takes the largest share at 25% while food and staples retailing, household products, food products and tobacco account for a double-digit allocation each. XLP lost 2.2% on the day and has a Zacks ETF Rank #4 (Sell) (read: Staples ETFs: What Investors Need to Know).
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 48 stocks in its basket. WMT occupies the second position in the basket with 8% of the assets. While broadline retailers make up for a bigger chunk at 21.1%, apparel retailers, food retailers & wholesalers, home improvement retailers and specialty retailers round off the next four spots. FTXD has accumulated $1.1 million in its asset base and trades in nearly 1,000 shares a day on an average. Its expense ratio is 0.60%. The product was down 0.5% on the day and has a Zacks ETF Rank #3 (Hold).
Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)
This fund tracks the MSCI USA IMI Consumer Staples Index, holding 98 stocks in its basket. Out of these, WMT takes the fifth spot with 7.9% share. The ETF is widely diversified across food and staples retailing, beverages, food products, household products, and tobacco. It has amassed $313 million in its asset base while trading in a moderate volume of around 89,000 shares a day on an average. It charges 8 bps in annual fees from investors and has lost 2.4% following Wal-Mart results. The product has a Zacks ETF Rank #5 (see: all Consumer Staples ETFs here).
This fund manages a $3.9 billion asset base and has exposure to a basket of 97 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It is the low cost choice in the consumer staples space, charging a fee of just 10 bps per year and trading in a good volume of around 112,000 shares. Here, WMT occupies the fifth position in the basket with 7.3% allocation. The product is widely spread across soft drinks, household products, packaged foods & meat, and tobacco that make up for a double-digit allocation each. The fund shed 2.2% on the day and has a Zacks ETF Rank #4.
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Wal-Mart's Dismal Q4 Results Drag Consumer Staples ETFs Down
Wal-Mart (WMT - Free Report) reported lackluster fourth-quarter fiscal 2018 results. The mega retailer’s nine-quarter long positive earnings surprise streak came to an end as it recorded slower growth in online sales. This dampened investors’ spirit, leading to the steepest share decline in three decades.
Q4 Performance
Earnings per share came in at $1.33, missing the Zacks Consensus Estimate by 3 cents but improving from the year-ago earnings of $1.36. Revenues increased 4.1% year over year to $136.3 billion and were ahead of the consensus mark of $135 billion.
Though same-store sales grew for the fourteenth consecutive quarter, climbing 2.6% year over year, slowdown in e-commerce sales growth was a major disappointment. Online sales grew just 23% year over year, a massive drop from 50% growth seen in the third quarter and 29% growth in the year-ago quarter. This is because Wal-Mart struggled to manage its online inventory, amassing holiday-related items such as electronics, toys and gifts and falling short of stocking everyday items (read: Will Wal-Mart ETFs Outdo Amazon in Last-Minute Shopping?).
Despite the slowdown in e-commerce sales, the discount chain is still optimistic as it reiterated its prior guidance of 40% online sales growth for the current fiscal. Additionally, it expects U.S. same-store sales to grow at least 2% and earnings per share in the range of $4.75-$5.00. The midpoint of the guidance is below the Zacks Consensus Estimate of $4.91.
Market Impact
The earnings miss and the dismal online sales pushed Wal-Mart shares down by more than 10% on the day. This represents its steepest one-day drop since Jan 8,1988 and wiped out more than $31 billion in the company’s market value. Meanwhile, WMT crushed the volume figure as nearly 52.1 million shares exchanged hands compared with around 9 million on an average.
Notably, the Wal-Mart shares debacle also shaved roughly 73 points from the Dow Jones and resulted in a 2.3% pullback in S&P 500 consumer-staples stocks (read: 6 Dow Stocks That Should Drive These ETFs Higher).
Wal-Mart has been underperforming the industry, having shed 4.7% so far this year against the latter’s 5.6% increase. It carries a Zacks Rank #2 (Buy) and a VGM Score of A. The stock belongs to a top-ranked Zacks industry (top 41%), suggesting that the beaten down prices could be a good entry point.
Consequently, ETFs having the highest allocation to the world's largest brick and mortar retailer will be in focus in the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises. These ETFs have seen rough trading following Wal-Mart’s results.
iShares Edge MSCI Multifactor Consumer Staples ETF
This fund targets companies that have the potential to outperform the broader U.S. consumer staples sector and tracks the MSCI USA Consumer Staples Diversified Multiple-Factor Capped Index. Holding 28 stocks in its basket, Wal-Mart takes the top spot, accounting for 10.3% of the portfolio. In terms of industrial exposure, about 54.4% of the portfolio is dominated by food, beverage and tobacco while household and personal product, and food & staples retailing take the remainder with a double-digit exposure each. CNSF has attracted $2.6 million in its asset base and trades in a meager volume of about 1000 shares. It charges 35 bps in fees per year and has shed 1.8% following Wal-Mart results. It has a Zacks ETF Rank #5 (Strong Sell).
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
This is the most popular consumer staples ETF with AUM of $7.5 billion and follows the Consumer Staples Select Sector Index. The fund charges 13 bps in fees per year from investors and trades in heavy volume of nearly 11.9 million shares a day. In total, the fund holds about 34 securities in its basket with Wal-Mart taking the fifth spot at 8.4%. From a sector look, beverages takes the largest share at 25% while food and staples retailing, household products, food products and tobacco account for a double-digit allocation each. XLP lost 2.2% on the day and has a Zacks ETF Rank #4 (Sell) (read: Staples ETFs: What Investors Need to Know).
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 48 stocks in its basket. WMT occupies the second position in the basket with 8% of the assets. While broadline retailers make up for a bigger chunk at 21.1%, apparel retailers, food retailers & wholesalers, home improvement retailers and specialty retailers round off the next four spots. FTXD has accumulated $1.1 million in its asset base and trades in nearly 1,000 shares a day on an average. Its expense ratio is 0.60%. The product was down 0.5% on the day and has a Zacks ETF Rank #3 (Hold).
Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)
This fund tracks the MSCI USA IMI Consumer Staples Index, holding 98 stocks in its basket. Out of these, WMT takes the fifth spot with 7.9% share. The ETF is widely diversified across food and staples retailing, beverages, food products, household products, and tobacco. It has amassed $313 million in its asset base while trading in a moderate volume of around 89,000 shares a day on an average. It charges 8 bps in annual fees from investors and has lost 2.4% following Wal-Mart results. The product has a Zacks ETF Rank #5 (see: all Consumer Staples ETFs here).
Vanguard Consumer Staples ETF (VDC - Free Report)
This fund manages a $3.9 billion asset base and has exposure to a basket of 97 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It is the low cost choice in the consumer staples space, charging a fee of just 10 bps per year and trading in a good volume of around 112,000 shares. Here, WMT occupies the fifth position in the basket with 7.3% allocation. The product is widely spread across soft drinks, household products, packaged foods & meat, and tobacco that make up for a double-digit allocation each. The fund shed 2.2% on the day and has a Zacks ETF Rank #4.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>