ETFs In Focus Post Better Q3 Retail Earnings

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The overall Q3 earnings picture for the retail sector has improved somewhat from the prior quarter. Total earnings from 93.8% of the sector’s total market capitalization reported so far are down 4.9% on 8.8% higher revenues, with 70.4% beating EPS estimates and 55.6% beating revenue estimates. This is better than an earnings decline of 4.9% and revenue growth of 47.9% in the second quarter.

The EPS and revenue beat percentages represent an improvement from the same group of companies in the preceding period but has been on the lower side of the 5-year range.

Most of the retailers beat estimates on both earnings and revenues and maintained their full-year outlook. As such, SPDR S&P Retail ETF (XRT - Free Report), Amplify Online Retail ETF (IBUY - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) have lost 0.1%, 7%, and 2.5%, respectively, over the past week, while VanEck Vectors Retail ETF (RTH - Free Report) is up 1.8%.  

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

Earnings in Focus

The second-largest department store retailer, Macy’s (M - Free Report) topped earnings and revenue estimates. It beat earnings estimates by 33 cents and revenues by $55 million. Macy’s reiterated its fiscal full-year revenue guidance in the range of $24.34-$24.58 billion but raised earnings per share to $4.07-$4.27 from $4.00-$4.20. For the fourth quarter of fiscal 2022, management anticipates net sales of $8.16-$8.4 billion and adjusted earnings of $1.47-$1.67 per share.

Leading departmental store Kohl’s (KSS - Free Report) also came up with upbeat results. Kohl’s posted adjusted earnings of 82 cents per share, outpacing the Zacks Consensus Estimate by a penny. Revenues of $4.28 billion slightly came below the consensus mark of $4.29 billion.

Home Depot (HD - Free Report), the world's largest home improvement retailer, topped estimates. Earnings per share of $4.24 surpassed the Zacks Consensus Estimate by 13 cents and revenues outpaced the same by $902 million. The retailer reaffirmed the fiscal 2022 guidance of approximately 3% for sales growth and mid-single-digit percentage range earnings per share.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW) beat estimates for earnings by 16 cents and revenues by $329 million. It expects sales of $97-$98 billion for the full-year 2022 and raised the earnings per share guidance to $13.65-$13.80 from $13.10-$13.60.

Big-box retailer, Target (TGT - Free Report), lagged the Zacks Consensus Estimate for earnings by 61 cents and surpassed revenue estimates by $138 million.

Walmart (WMT - Free Report) surpassed both earnings and revenue estimates and lifted its full-year profit outlook. Earnings per share came in at $1.50, outpacing the Zacks Consensus Estimate of $1.32. Revenues rose 8.7% year over year to $152.8 billion and topped the consensus mark of $147.4 billion. The world's biggest retailer expects earnings per share to drop around 6-7%, better than the previous projection of a decline of 8-10%.

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 97 stocks in its basket, with none making up for more than 1.7% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, specialty stores, automotive retail, and Internet & direct marketing retail.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $519.6 million and an average trading volume of 4.5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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 two firms with double-digit exposure each, while the other firms hold no more than 8.5% share.

VanEck Vectors Retail ETF has amassed $154.8 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 12,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 with a Medium risk outlook.

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 58 stocks in its basket, with none accounting for more than 2.8% of assets. Amplify Online Retail ETF has the largest allocation of 45% in the marketplace and 44% in traditional retail.

Amplify Online Retail ETF has attracted $194.7 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 33,000 shares.

ProShares Online Retail ETF (ONLN)

ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeros in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 25 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.5% of assets. American firms make up 69.6% of the portfolio, while Chinese firms account for 21.2% share.

ProShares Online Retail ETF has accumulated $118.8 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 114,000 shares.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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