Q1 Earnings Fail To Boost Retail ETFs

The Q1 earnings picture for the retail sector is among the strongest this reporting cycle with the sector gaining 0.7% (average price difference between a day before and after the earnings announcement of a stock) post results.

Total earnings from 92.8% of the sector’s total market capitalization reported so far are up 13.7% on 8.3% higher revenues with 75% of the companies beating on earnings and 53.6% exceeding top-line estimates. While EPS beat is tracking above or is almost in-line with historical periods, revenue beat is tracking below for the same group of retailers.

Investors should note that most of the retailers came up with solid earnings either beating on top or bottom lines or both. However, their share price responded negatively.

Let’s dig into the details of some of the earnings releases. We have detailed the share price movement based on the earnings release as the recent broad sell-off has hurt almost all the sectors, including retailers. Therefore, price movement since the earnings releases can mislead investors who are considering exposure to the space based on earnings.

Earnings Sending Stocks Higher

Big-box retailer Target (TGT - Free Report) emerged as the real champion in the Q1 earnings season as the stock jumped 7% following solid earnings. The company topped the Zacks Consensus Estimate by 10 cents for earnings and by $87 million for revenues.

The world's largest retailer, Wal-Mart (WMT - Free Report) , gained nearly 1% in response to the earnings announcement. It topped earnings estimates by 11 cents but fell shy of the consensus mark for revenues by $1.3 billion. Additionally, the company recorded the best first quarter same-store sales in nine years.  

The Dampeners

One of the leading departmental stores, Kohl’s KSS lost the most. The stock has tumbled nearly 15% following lackluster first-quarter fiscal 2019 results. Earnings per share missed the Zacks Consensus Estimate by 6 cents and revenues came in lower than the estimate by $116 million. The company slashed its fiscal year earnings per share guidance to $5.15-$5.45 from the prior guidance of $5.80-$6.15.

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