After a spree of disappointing holiday sales announcements, investors have been less-than-excited about a tepid retail industry that has continued to struggle in the face of changing consumer behavior. However, solid fourth-quarter reports from Wal-Mart WMT , Macy's M , and Home Depot HD have investors in a frenzy on Tuesday.
Perhaps the best example of uncertainty in this industry is Wal-Mart, a traditional behemoth that has lost its position as the world's largest retailer to Amazon AMZN and was notoriously late to the online shopping party.
Nevertheless, Wal-Mart has recently undergone a period of massive investment in e-commerce initiatives and has been able to boost traffic in its stores despite the difficulties of other brick-and-mortar retailers.
(Also Read: Wal-Mart Beats on Q4 Earnings and Sales )
Wal-Mart released its fourth-quarter report on Tuesday morning, and investors were pleased by better-than-expected earnings and revenue results. Earnings per share came in at $1.30, a penny higher than our Zacks Consensus Estimate, and revenues of $130.9 billion also surpassed our consensus estimate of $130.6 billion.
U.S. comparable stores sales were up 1.8% in the quarter, and this comps growth was fueled by a 1.4% uptick in traffic and a 0.4% gain in average ticket. Investments in e-commerce also seem to be paying off, as evidenced by its e-commerce GMV growth of 36%.
Shares of WMT were up about 3% in morning trading following the release of the report.
Macy's Gains on Earnings Beat
Macy's Inc., a staple of the American mall, has also been affected by the shift away from brick-and-mortar retailers. Just last month, the company identified 68 stores to close and indicated plans to shutter even more stores in an effort to satisfy activist investors.
Macy's announced its fourth-quarter results on Tuesday morning. The company posted earnings of $2.02 per share, beating our Zacks Consensus Estimate of $1.97. However, revenues were down about 4% to $8.515 billion, which missed our consensus estimate of $8.582 billion. Macy's also saw comps decline about 2.1% on an owned plus licensed basis and 2.7% on an owned basis.
(Also Read: Macy's Q4 Earnings Surpass Estimates, Stock Up )
"While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit," said CEO Terry Lundgren. "These include continued improvement in our digital platforms, the rollout of our new approach to fine jewelry and women's shoes, an increase in exclusive merchandise, and the refinement of our clearance and off-price strategy."
Macy's will most likely continue to see tough year-over-year revenue and comps comparisons, but the company's commitment to cutting the fat and improving earnings is encouraging. Shares of M were up as much as 3% in Tuesday morning trading, but the stock retreated a bit and was up just 0.65% heading into the afternoon.
Home Depot Shows Housing Market Strength
Home Depot is interesting because it is not only a popular retailer, but also an important indicator of the health of the housing market. The company tends to perform well during housing booms because shoppers are more likely to invest in their homes when overall home values are on the rise.
Home Depot posted earnings of $1.44 per share, which surpassed our Zacks Consensus Estimate of $1.33 per share. Furthermore, revenues of $22.207 billion beat our estimate of $21.806 billion and grew 5.8% year-over-year.
(Also Read: Home Depot Tops Q4 Earnings, Updates Capital Strategy )
U.S. comps were up 6.3% in the quarter, and the company said that it expects comps and revenues to grow about 4.6% in 2017. Shares of HD opened about 3% higher, but those gains trickled down towards 0.5% by the afternoon.
There was strength throughout the market on Tuesday morning, as all of the major indexes were green after the long weekend. Some of those gains were supported by the solid morning retail reports, and investors should consider these results as even more retailers prepare to report.
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