EC Strong Retail Sector Earnings Performance

Wal-Mart (WMTshares struggled this year, with the retail giant’s February 19 earnings release raising doubts about its online business as well as overall margins. The stock lost more than 10% of its value following the February earnings report, with the subsequent May 17 release doing little to ease those worries.

Those clouds appear to have finally lifted after this quarterly report, where the retailer seems to be checking all the appropriate boxes, from a ramp-up in online sales to comp growth and even market share gains. This is helping the stock finally enjoy some sunshine.

Wal-Mart is hardly alone in enjoying the market’s affections after coming out with better-than-expected results. The overall tone of Retail sector results in recent days has been positive, notwithstanding a few standout disappointments like Macy’s (M).

The chart below shows the quarter-to-date stock market performance of Wal-Mart (blue line), Macy’s (green line), the Zacks Retail sector (red line) and the S&P 500 index (orange line). As you can see, while the market has punished Macy’s and Wal-Mart on their respective earnings reports, the sector as a whole has done marginally better than the index.

We have a number of major retailers like Kohl’s (KSS)Target (TGT) and others coming out with Q2 results the week of the 20th, but the sector’s results thus far have been very good.

We now have Q2 results from 24 of the 38 retailers in the S&P 500 index that, combined, account for 85.1% of the sector’s total market cap in the index. Total earnings for these Retail sector companies that have reported results are up 34.9% from the same period last year on +9.7% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.

The comparison charts below put the sector’s Q2 results in a historical context.

As you can see, this is better performance than we have seen from these same retailers in other recent periods. Please note that the sector’s Q2 performance compares favorably to historical periods even after we exclude Amazon’s (AMZNimpressive results, as the ex-Amazon growth comparison chart below shows.

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Note: Sheraz Mian regularly provides earnings analysis on and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the  more

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