Yahoo Finance Slew of Q1 Earnings Beat Fails to Impress Retail ETFs
The overall Q4 earnings picture for the retail sector seems good, but guidance is disappointing, spreading pessimism in the sector. VanEck Vectors Retail ETF RTH, Amplify Online Retail ETF IBUY, SPDR S&P Retail ETF XRT and ProShares Online Retail ETF ONLN have lost 2.1%, 2.5%, 3.7%, and 4.5% respectively, over the past week (see: all the Consumer Discretionary ETFs here).
Most of the big-box retailers came up with an earnings or revenue beat but slashed their guidance for the fiscal year. Total earnings from 95.3% of the sector’s total market capitalization reported so far are up 5.1% on 6.1% higher revenues, with 85.2% beating EPS estimates and 66.7% beating revenue estimates.
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart WMT surpassed both earnings and revenue estimates and raised its outlook for the full year. Earnings per share came in at $1.47, outpacing the Zacks Consensus Estimate of $1.32 and improving 13% from the year-ago earnings. Revenues rose 7.6% year over year to $152.3 billion and topped the consensus mark of $149.6 billion. The mega-retailer lifted its fiscal 2024 guidance. It now expects revenues to rise 3.5% compared with the previous projection of 2.5-3%. WMT expects earnings per share in the range of $6.10-$6.20, up from $5.90-$6.05. For second-quarter fiscal 2024, earnings per share are expected in the range of $1.63-$1.68 (read: Walmart Beats on Q1 Earnings, Lifts View: ETFs in Focus).
Home Depot HD, the world's largest home improvement retailer, reported mixed results. Earnings per share of $3.82 surpassed the Zacks Consensus Estimate by 2 cents but revenues missed the same by $1.2 billion. The retailer lowered its revenue and earnings view for fiscal 2023. It expects sales to decline 2-5% year over year compared with the previous guidance of flat year-over-year sales. Home Depot expects earnings per share to drop 7-13% versus a mid-single-digit decline projected earlier.
Meanwhile, the second-largest home improvement retailer, Lowe’s LOW beat estimates for earnings by 19 cents and for revenues by $784 million. It also lowered the revenue and earnings per share guidance for fiscal 2023. Revenues are expected in the range of $87-$89 billion versus the earlier projection of $88-$90 billion. Earnings per share are expected to be $13.20-$13.60 versus the earlier guidance of $13.60-$14.00.
Big-box retailer, Target TGT, topped the Zacks Consensus Estimate for earnings by 31 cents and surpassed revenue estimates by $42 million. For fiscal 2023, the company reiterated its full-year guidance, with sales falling in the low-single digits and earnings per share of $7.75-$8.85.
Leading departmental store Kohl’s KSS came up with strong results. Kohl’s posted earnings of 13 cents per share against the Zacks Consensus Estimate of a loss of 44 cents. Revenues of $3.6 billion also came in above the consensus mark of $3.5 billion. 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)
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, while the other firms hold no more than a 9.4% share.
VanEck Vectors Retail ETF has amassed $145 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 4,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETF Areas to Benefit/Lose from Cooling U.S. inflation).
Amplify Online Retail ETF (IBUY)
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 61 stocks in its basket, with none accounting for more than 4% of assets. Amplify Online Retail ETF has the largest allocation of 49% in online retail and 39% in marketplace.
Amplify Online Retail ETF has attracted $190.8 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 14,000 shares.
SPDR S&P Retail ETF (XRT)
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 87 stocks in its basket, with none making up for more than 2.1% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, specialty stores, apparel retail, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $325.2 million and an average trading volume of 5.4 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)
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels, and then zero 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 6.7% of assets. American firms make up 74.2% of the portfolio, while Hong Kong firms account for a 15% share.
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 16,000 shares.
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Target Corporation (TGT) : Free Stock Analysis Report
Kohl's Corporation (KSS) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
