Retailers saw a weak Q1 with total earnings from 97.3% of the
sector's total market capitalization reported so far being flat on
3.3% revenue growth. Earnings surprises were predominantly negative
for retailers, with only 43.9% of the companies beating earnings
estimates, the lowest in the S&P 500, and an even lower 39.0%
Further, the retail sector has been the weakest among the 16 Zacks
sectors in terms of price performance from a year-to-date look.
This is especially true as the retail sector stocks in the S&P
500 are down over 5% versus over 3% gain for the S&P 500. Harsh
winter, intense price competition and lower consumer income have
taken a toll on the broad retail space.
In particular, lower-than-expected earnings from retailers like
), Staples (
), Urban Outfitters (
) and Dicks Sporting Goods (
), and their sliding stock prices have been the major culprits,
spreading bearishness in the retail sector on the whole (read:
Wal-Mart Earnings Miss Push These ETFs Down
However, modest price appreciation by Home Depot (
) and Lowe's (
) despite soft results as well as solid earnings beat by Tiffany
& Company (
) and J. C. Penney (
) have been reassuring and managed to hold better than others.
Retail Earnings in Focus:
The Real Dampeners
Dicks Sporting Goods
is the major loser as the stock has tumbled nearly 19% to date post
its earnings announcement and touched a new 52-week low of $42.55
last week. The company missed the Zacks Consensus Estimate by 3
cents on earnings and $20 million on revenues. Further, the company
cut its full-year earnings guidance from $3.03-$3.08 to $2.70-$2.85
on weak demand for its golf and hunting products. The midpoint
($2.78) is in line with the Zacks Consensus Estimate.
Shares of specialty retailer,
, also fell about 10% and are currently hovering around its
two-year low. This is because the company reported earnings per
share of 26 cents, missing our estimate by a penny, and revenues of
$686.3 million which fell shy of the Zacks Consensus Estimate of
The U.S. largest office product retailer,
, has also fallen 13% to date post lackluster earnings results.
Earnings per share came in at 18 cents, much below the Zacks
Consensus Estimate of 21 cents but revenues of $5,654.0 million was
above our estimate of $5,626.0 million (read:
A Comprehensive Guide to Retail ETFs
Retail Stocks Springing Surprises
, the world's largest home improvement retailers, bucked the
negative trend in the price performances despite lagging the Zacks
Consensus Estimate on both earnings and revenues due to a slow
start to spring selling season.
The shares of HD are up 1.6% post earnings announcement as the
company raised its full year earnings guidance from $4.38 to $4.42
(midpoint $4.40), which is on par with the Zacks Consensus
Estimate. LOW added 3.6% to date after its quarterly results and
raised its full-year earnings guidance from $2.60 to $2.63, which
is well above the Zacks Consensus Estimate of $2.59.
Shares of one of the leading jewelry retailers,
, have surged 16% to date as it comfortably topped our earnings
estimate by 20 cents and revenue estimate by $59.1 million.
Additionally, the company raised its earnings guidance from
$4.05-$4.15 to $4.15-$4.25. However, the projection is far below
the current Zacks Consensus Estimate of $4.27 (see:
all the Consumer Discretionary ETFs here
Struggling retailer -
- again surprised the market with improved sales and earnings
numbers. The departmental store retailer posted loss of $1.16 per
share on $2.8 billion in revenues, faring better than the Zacks
Consensus Estimate of loss of $1.27 and revenue estimate of $2.7
billion. The stock is up 7.6% following its earnings announcement.
ETFs in Focus
The weak and strong performances by retailers have put retail ETFs
in focus for the next few days. Investor seeking to tap the current
beaten down prices in a diversified way could consider the
following three ETFs. Any of these could be considered solid picks
given that these have a favorable Zacks ETF Rank of '2' or '3' and
retail fundamentals are improving.
SPDR S&P Retail ETF (
This product tracks the S&P Retail Select Industry Index,
holding 105 securities in its basket. It is widely spread across
each component as none of these holds more than 1.46% of total
assets. About half of the portfolio is dominated by small cap
stocks while the rest have been split between the other two market
cap levels (read:
3 Small Cap ETFs Outperforming the Russell 2000
In terms of sector holdings, apparel retail takes the top spot at
one-fourth share in the basket while specialty stores, automotive
retail and Internet retail have double-digit allocations. The fund
has amassed about $680 million in its asset base and trades in
heavy volume of nearly 3.2 million shares per day. The ETF charges
35 bps a year in fees. XRT was flat over the past 10 trading
sessions and has a Zacks ETF Rank of 2 or 'Buy' rating with Medium
Market Vectors Retail ETF (
This fund follows the Market Vectors US Listed Retail 25 Index and
holds about 26 stocks in its basket with AUM of $27.5 million.
Average daily volume is light at under 39,000 shares while expense
ratio is at 0.35%. The product is a large cap centric fund and
heavily concentrated on the top 10 holdings with 63.4% of assets
with largest allocations to WMT, Amazon.Com (
) and HD.
Sector wise, specialty retail occupies the top position with less
than one-third share, followed by double-digit allocation to
hypermarkets, drug stores, departmental stores, and health care
services. RTH added about 0.8% over the past 10 days and has a
Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.
PowerShares Retail Fund (
This retail fund provides diversified exposure across various
market caps with 39% in large caps, 34% in small caps and the rest
in mid caps. This is easily done by tracking the Dynamic Retail
Intellidex Index. The fund has accumulated $24.9 million in its
asset base while trades in light volume of under 12,000 share a
day. The ETF charges 63 bps in fees per year (read:
ETFs to Watch on Rotten Whole Foods Earnings
In total, the product holds 30 securities with moderate
concentration of 45.8% across the top 10 holdings. In terms of
industrial exposure, food retail takes the top spot at 21.53%,
followed by automotive retail (15.89%) and drug retail (13.65%).
PMR gained about 2% in the past 10 trading sessions and has a Zacks
Rank of 3 with a Medium risk outlook.
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PWRSH-DYN RETL (PMR): ETF Research Reports
MKT VEC-RETAIL (RTH): ETF Research Reports
SPDR-SP RET ETF (XRT): ETF Research Reports
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