A Look At Retail ETFs Post Q1 Earnings

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The overall first-quarter earnings picture for the retail sector has been modest. Total earnings from 95.4% of the sector’s total market capitalization reported so far are up 31.9% on 5.6% higher revenues, with 69.2% beating EPS estimates and 57.7% beating revenue estimates. However, this is a notable deceleration from the growth trend of the last few quarters, particularly once Amazon’s (AMZN) numbers are excluded from the results in terms of growth rates. The beat ratios are also tracking notably below the 20-quarter average.

Most of the big-box retailers came up with an earnings or revenue beat or both. The results had a mixed impact on retail ETFs. SPDR S&P Retail ETF (XRT - Free Report), Amplify Online Retail ETF (IBUY - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) have gained 2.6%, 0.8%, and 5.6%, respectively, over the past month, while VanEck Vectors Retail ETF (RTH - Free Report) shed 0.7%.  

Let’s dig into the details of some of the earnings releases.

Earnings in Focus

Walmart (WMT - Free Report) reported robust first-quarter fiscal 2025 results, wherein it surpassed both earnings and revenue estimates. Earnings per share came in at 60 cents, outpacing the Zacks Consensus Estimate of 52 cents and improving from the year-ago earnings of 49 cents. Revenues rose 6% year over year to $161.5 billion and topped the consensus mark of $159.50 billion. The megaretailer offered upbeat guidance for the fiscal year, spreading huge optimism and signaling a resilient consumer environment. It now expects revenue growth to be at the high end or slightly above its previous guidance of 3-4% and earnings per share at the high end or slightly above the original guidance of $6.70-$7.12.

Home Depot (HD - Free Report), the world's largest home improvement retailer, reported better-than-expected earnings but lagged revenue estimates. Earnings per share surpassed the Zacks Consensus Estimate by a couple of cents but revenues missed the same by $236 million. The retailer reaffirmed its outlook for fiscal 2024. Home Depot anticipates sales to increase 1% year over year, including $2.3 billion of sales contribution from the 53rd week. It estimates earnings per share to increase 1% year over year. It expects the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.

Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 12 cents and revenues by $290 million. It reiterated its fiscal 2024 view. It continues to anticipate total sales to be in the range of $84-$85 billion. The company expects earnings per share in the range of $12.00-$12.30.

Big-box retailer Target (TGT - Free Report) missed the Zacks Consensus Estimate for earnings by a couple of cents and beat estimates for revenues by $14 million. The retailer foresees comparable sales to be flat to up 2% in the second quarter of fiscal 2024. It expects adjusted earnings per share between $1.95 and $2.35 compared with $1.80 reported in the year-ago period.


ETFs in Focus

Below, we have highlighted the ETFs in detail:  


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 2% 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 $350.5 million and an average trading volume of 7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Amplify Online Retail ETF

Amplify Online Retail ETF offers global exposure to publicly traded companies with significant revenues from the online retail business, traditional online retail, online travel, online marketplace and omni-channel retail by tracking the EQM Online Retail Index. IBUY holds 79 stocks in its basket, with none accounting for more than 3.4% of the assets. Amplify Online Retail ETF has the largest allocation, with 41% in online retail and 31% in online marketplace.

Amplify Online Retail ETF has attracted $170.2 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 10,000 shares.

ProShares Online Retail ETF

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 18 stocks in its basket. ONLN is highly concentrated on the top three firms, while the other firms hold no more than 5.4% of the assets. American firms make up 73% of the portfolio, while Ireland firms account for a 12.2% share.

ProShares Online Retail ETF has accumulated $98.6 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 20,000 shares.

VanEck Vectors Retail ETF

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 9.5% share.

VanEck Vectors Retail ETF has amassed $202.4 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 #2 (Buy) with a Medium risk outlook.

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