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Walmart Disappoints: ETFs in Focus

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Walmart’s (WMT - Free Report) fourth-quarter fiscal 2020 results disappointed investors. The mega retailer broke its positive surprise streak by registering its first quarterly earnings miss in the past two years. Revenues also fell shy of the Zacks Consensus Estimate. A shorter holiday season and weak demand for apparel, toys and electronics hurt sales in stores.

Earnings per share came in at $1.38, missing the consensus estimate by 5 cents. Also, the bottom line declined from the year-ago figure of $1.41. Revenues inched up 2.1% year over year to $141.7 billion but fell short of the consensus mark of $142.4 billion. U.S. comp sales increased on a two-year stacked basis by 6% with continued strength in food and consumables. E-commerce sales jumped 35%, driven by strong online sales and robust growth in online grocery.

For fiscal 2021, the brick-and-mortar retailer expects adjusted earnings per share of $5-$5.15, sales growth of 3% at constant currency, and U.S. comparable store sales growth of 2.5%.

Market Impact

Despite the miss, shares of WMT gained 1.5% on the day of the earnings release. The stock also crushed its average daily volume figures as nearly 10.9 million shares moved hands compared with 5.4 million on average. WMT currently has a Zacks Rank #3 (Hold) and a VGM Score of C. It belongs to a favorable Zacks industry (placed at the top 23% of 250+ industries) (see: all Consumer Staples ETFs here).

Consequently, ETFs having the highest allocation to the world's largest brick-and-mortar retailer have been in focus following the results. Below, we have highlighted six of them:

VanEck Vectors Retail ETF (RTH - Free Report)

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, WMT occupies the third position in the basket with 9.1% share. The product has amassed $91 million in its asset base and charges 35 basis points (bps) in annual fees. Volume is light as it exchanges nearly 11,000 shares per day. RTH gained 0.6% post WMT results and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Amazon Q4 Earnings Put These ETFs in Focus).

Consumer Staples Select Sector SPDR Fund (XLP - Free Report)

This is the most popular consumer staples ETF with AUM of $14.3 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 11.7 million shares a day. In total, the fund holds about 33 securities in its basket with Walmart taking the fourth spot at 8.4%. From a sector perspective, beverages take the largest share at 26.9% while household products, food and staples retailing, and food products account for a double-digit allocation each. XLP shed 0.3% on the day of the earnings release and has a Zacks ETF Rank #3 with a Medium risk outlook.

Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)

This fund tracks the MSCI USA IMI Consumer Staples Index, holding 90 stocks in its basket. Out of these, Walmart takes the fourth spot with 7.9% share. The ETF is widely diversified across beverages, household products, food and staples retailing, food products, and tobacco. It has amassed $632.5 million in its asset base, while trading in moderate volume of around 119,000 shares a day on average. It charges 8 bps in annual fees from investors and lost 0.4% following WMT results. The product has a Zacks ETF Rank #3 with a Medium risk outlook (read: Trump Budget 2021 Likely to Impact These Sector ETFs).

Vanguard Consumer Staples ETF (VDC - Free Report)

This fund manages a $5.7 billion asset base and has exposure to a basket of 92 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It charges a fee of 10 bps per year and trades in a good volume of around 110,000 shares per day on average. Here, Walmart occupies the fourth position in the basket with 7.6% allocation. The product is widely spread across household products, soft drinks, packaged foods & meat, and hypermarkets & super centers that make up for a double-digit allocation each. The fund was down 0.4% on the day of the earnings release and has a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Nasdaq Retail ETF (FTXD - Free Report)

The fund follows the Nasdaq US Smart Retail Index and holds 49 stocks in its basket. WMT takes the third spot with 7.5% of the assets. FTXD has accumulated $4.9 million in its asset base and has an expense ratio of 0.60%. It trades in average daily volume of 3,000 shares. The ETF has added 0.9% post WMT results and has a Zacks ETF Rank #3.

iShares Evolved U.S. Discretionary Spending ETF (IEDI - Free Report)

This is an actively managed ETF that employs data science techniques to identify companies with exposure to the discretionary spending sector. Holding 223 stocks in its basket, WMT occupies the third position with 6.1% share. The fund has accumulated $13 million in its asset base and charges 18 bps in fees per year. Volume is paltry as it exchanges 9,000 shares a day on average. IEDI gained 0.1% following WMT results.

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