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Retail ETFs Up on Q3 Earnings

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The earnings picture for the retail sector has been the weakest this reporting cycle with the sector losing 0.9% (average price difference between a day before and after the earnings announcement of a stock) post results.

Total earnings from 92.7% of the sector’s total market capitalization reported so far are up 1.8% on 9.9% higher revenues with 63% of the companies beating on earnings and 53.9% exceeding top-line estimates. Both earnings and revenues beat is tracking below that of historical periods for the same group of retailers (read: October Retail Sales Show Subdued Strength: ETFs in Focus).

Investors should note that most of the retailers came up with solid earnings either beating on top or bottom lines, or both. Let’s dig into the details of some of the earnings releases.

Earnings Sending Stocks Higher

Big-box retailer Target TGT emerged as the real champion this time around as the stock jumped 15.2% following solid earnings. The company topped the Zacks Consensus Estimate by 17 cents for earnings and by $198 million for revenues. It expects earnings per share in the range of $1.54-$1.74 for the fiscal fourth quarter and raised the forecast for fiscal 2019 to $6.25-$6.45 from the previous range of $5.90-$6.20.

Specialty retailer, Nordstrom’s JWN share price climbed 11.8% in response to its earnings announcement. The company beat the Zacks Consensus Estimate by 16 cents on earnings and $31 million on revenues. The retailer lifted its low-end of earnings per share guidance for fiscal 2019 to $3.30-$3.50 from $3.25-$3.50.

The second-largest home improvement retailer, Lowe’s LOW beat earnings estimates by 6 cents while missed on revenues by $307 million. The company lifted earnings per share guidance to $5.63-$5.70 from the previous guidance of $5.45-$5.65. The stock jumped 3.2% in response to its earnings announcement (read: 2 Innovative Real Estate ETFs).

The second largest department store retailer, Macy’s (M - Free Report) saw an increase of 2.7% in its stock price following its earnings release. It beat earnings estimates by 6 cents. However, revenues fell short by $137 million. Management lowered earnings per share view to $2.57-$2.77 from $2.85-$3.05 for fiscal 2019.

The Dampeners

One of the leading departmental stores, Kohl’s KSS lost the most. The stock has tumbled nearly 19% following lackluster third-quarter fiscal 2019 results. Earnings per share missed the Zacks Consensus Estimate by 11 cents and revenues lagged estimates by $41 million. The company slashed its fiscal year earnings per share guidance to $4.75-$4.95 from the prior view of $5.15-$5.45.

Home Depot HD, the world's largest home improvement retailer, also dampened investors’ mood as its share price plunged 7.5% in response to its earnings announcement. Earnings per share of $2.53 were in line with the Zacks Consensus Estimate while revenues lagged by $251 million. However, the company reiterated its earnings view of $10.03 for fiscal 2019.

J.C. Penney JCP lost 3.6% following its earnings announcement despite the fact it beat earnings estimates. The company posted loss per share of 30 cents, much narrower than the Zacks Consensus Estimate of a loss of 55 cents. Revenues nevertheless fell short of estimates by $29 million.

The world's largest retailer, Wal-Mart WMT, topped earnings estimates by 7 cents but fell shy of the consensus mark for revenues by $995 million. The company raised its fiscal 2020 view. Including Flipkart, it now expects adjusted earnings per share to increase slightly, and to rise in the high single-digit percentage range, excluding it. Previously, WMT expected a slight decrease to slight increase in earnings per share including Flipkart, and an increase in the mid-to-high single digit range, excluding it. The share price of WMT fell 1.7% following the earnings announcement (read: Walmart Beats on Earnings, Raises View: ETFs in Focus).

ETFs in Focus

A slew of positive price reactions drove the retail space and ETFs higher from one-month look. Below, we have highlighted six ETFs in detail that are in focus in the weeks ahead (see: all the Consumer Discretionary ETFs here):  

Amplify Online Retail ETF IBUY

This ETF has attracted $239.9 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 47 stocks, each accounting for less than 3.7% of the assets. In terms of industrial exposure, online retail makes up for 59% share while marketplace and travel round off the next two spots. IBUY was up 0.1% in a month.


With AUM of $213 million, this product tracks the S&P Retail Select Industry Index, holding 85 securities in its basket with each accounting for no more than 2% of assets. Apparel retail takes the top spot at 21.4% share while automotive retail, Internet & direct marketing retail, and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 basis points (bps) in annual fees and has gained 3% in a month. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Bet on Brick-and-Click Retailing With These ETFs).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon AMZN at 19.6% and Home Depot HD at 11.1% — while the other firms hold no more than 9.2% share. The product has amassed $105.2 million in its asset base and charges 35 bps in annual fees. RTH has added 3% in a month and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

ProShares Online Retail ETF ONLN

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 24 stocks in its basket with highest concentration going to the top firm, Amazon with one-fourth share. American firms make up three-fourth of the portfolio, while China accounts for 20.6% share while Argentina based companies have a minor share at 2.4%. ONLN has accumulated $22.5 million in a month and charges 58 bps in annual fees. It gained 2.8% in a month (read: ETFs to Tap Alibaba's Stunning Hong Kong Debut).

First Trust Nasdaq Retail ETF FTXD

The fund follows the Nasdaq US Smart Retail Index and holds 49 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 8.2% of the assets. While specialty retail make up for a substantial 47% share, departmental stores and hypermarkets round off the next spots. FTXD has accumulated $8.7 million in its asset base and has an expense ratio of 0.60%. The ETF has jumped 4.1% in a month and has a Zacks ETF Rank #3.

Invesco Dynamic Retail ETF PMR

This fund follows the Dynamic Retail Intellidex Index. In total, the product holds 30 securities with each holding less than 5.5% of the assets. In terms of industrial exposure, specialty retail takes the largest share at 53%, while departmental stores, hypermarkets, Internet & direct marketing also round off the next spots. The fund has accumulated just $8.5 million in its asset base and charges 63 bps in fees per year. It has gained 4% in a month and has a Zacks ETF Rank #3 with a Medium risk outlook.

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