The overall earnings picture for the retail sector has been decent amid the ongoing pandemic. Total earnings from 94.5% of the sector’s total market capitalization reported so far are flat on 6.7% higher revenues with 76.9% of the companies beating on earnings and 84.6% exceeding top-line estimates. While the growth pace is well below the four-quarter average, revenues and earnings surprises are much better than the recent quarters.
This is especially true as the digital shift has led to soaring e-commerce sales for traditional brick-and-mortar retailers. As such, most of them came up with stronger-than-expected results with a beat on both the top and bottom lines though a few still lost in terms of share value (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Big-box retailer Target TGT jumped 11.2% following the earnings announcement. It topped the Zacks Consensus Estimate for earnings and revenues by $1.74 and $2.7 billion, respectively. The company has surpassed earnings estimates every time since the October quarter of 2018.
On the other hand, the world's largest retailer, Wal-Mart WMT topped earnings estimates by 34 cents and revenue estimates by $2.87 billion. It has posted the biggest-ever growth in online sales as consumers increasingly turned online to shop for everything from electronics and toys to groceries during the pandemic. However, the share price of WMT fell 2.3% in response to its earnings announcement (read: Walmart Solid Q2 Results Put These ETFs in Focus).
The second-largest home improvement retailer, Lowe’s LOW beat earnings estimates by 72 cents and revenues by $2.4 billion. This represents the fifth-straight earnings beat and the second-consecutive sales surprise. The stock gained 0.4% in response to its earnings announcement. Meanwhile, shares of Home Depot HD, the world's largest home improvement retailer, plunged 1.9% in response to its earnings announcement. Earnings per share of $4.02 surpassed the Zacks Consensus Estimate of $3.82 while revenues outpaced the consensus mark by $2.9 billion.
One of the leading departmental stores, Kohl’s KSS lost the most. The stock has tumbled nearly 16.5% following better-than-expected second-quarter fiscal 2020 results. The company posted adjusted loss of 25 cents per share, narrower than the Zacks Consensus Estimate of loss of 92 cents. Revenues of $3.41 billion also came in above the Zacks Consensus Estimate of $3.17 billion.
ETFs in Focus
That said, a slew of robust results drove the retail space and ETFs higher from a one-month look. Below we have highlighted five ETFs in detail that should be in focus in the weeks ahead:
Amplify Online Retail ETF IBUY
This ETF has attracted $941.9 million to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 48 stocks, each accounting for less than 6.5% of the assets. IBUY charges 65 bps in annual fees and has gained 20.2% in a month.
ProShares Online Retail ETF ONLN
This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket with the highest concentration on the top firm — Amazon (AMZN). American firms make up three-fourth of the portfolio, while China accounts for 20.3% share. ONLN has accumulated $314.3 million in its asset base and charges 58 bps in annual fees. It has added 20.6% in a month (read: 5 Sector ETFs That Have Gained More Than 50% This Year).
SPDR S&P Retail ETF XRT
With AUM of $423.4 million, this product tracks the S&P Retail Select Industry Index, holding 82 securities in its basket with each accounting for no more than 6.5% of assets. Internet & direct marketing retail takes the largest share at 27.7% while automotive retail, apparel retail and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 bps in annual fees and has gained 12.6% in a month. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Cyclical Sector ETFs Hitting New Highs).
VanEck Vectors Retail ETF RTH
This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon at 22.5% and Home Depot at 11% — while the other firms hold no more than 8.82% share. The product has amassed $159.4 million in its asset base and charges 35 bps in annual fees. RTH has added 6.6% in a month and has a Zacks ETF Rank #2 with a Medium risk outlook.
First Trust Nasdaq Retail ETF FTXD
The fund follows the Nasdaq US Smart Retail Index and holds 51 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 8.5% of the assets. FTXD has accumulated $4 million in its asset base and has an expense ratio of 0.60%. The ETF has jumped 5.8% in a month and carries a Zacks ETF Rank #3.
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Target Corporation (TGT): Free Stock Analysis Report
The Home Depot, Inc. (HD): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
Lowes Companies, Inc. (LOW): Free Stock Analysis Report
Kohls Corporation (KSS): Free Stock Analysis Report
SPDR SP Retail ETF (XRT): ETF Research Reports
VanEck Vectors Retail ETF (RTH): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
First Trust NASDAQ Retail ETF (FTXD): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
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