Retail ETFs In Focus Ahead Of Q1 Earnings

The first-quarter earnings season has effectively come to an end for most of the sectors, save retail, more than half of which is still to report. Total earnings for the companies reported so far are down 15.1% on 11.2% revenue growth with 70.6% beating EPS estimates and 88.2% beating revenue estimates.

Investors should note that the retail space has been badly hit by pandemic-related lockdowns. This can easily be depicted by the latest data, which shows that America’s retail sales collapsed by a record 16.4% last month amid coronavirus lockdowns and a spending slump.

Retail sector results reported so far were primarily from online vendors and restaurant players. The focus now shifts to traditional brick-and-mortar retailers like Wal-Mart (WMT - Free Report), Home Depot (HD - Free Report), Lowe’s (LOW - Free Report), and Target (TGT - Free Report) and store channels like Nordstrom (JWN - Free Report), and Kohls (KSS - Free Report) that are expected to report this week. In particular, e-commerce retailers have been on a tear due to higher demand for work and play indoors due to the coronavirus pandemic.

As a result, retail ETFs SPDR S&P Retail ETF (XRT - Free Report)VanEck Vectors Retail ETF (RTH - Free Reportand First Trust Nasdaq Retail ETF (FTXD - Free Reporthave gained 7.5%, 1.8%, and 3.3%, respectively, in the past month. Online retail ETFs Amplify Online Retail ETF (IBUY - Free Reportand ProShares Online Retail ETF (ONLN - Free Reporthave climbed 20.7% and 14.3%, respectively.

Given the strong e-commerce trend, it is reasonable to be optimistic about earnings results from the above-mentioned traditional operators and their stock prices. These have the potential to push the above-mentioned ETFs upward or downward.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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