The earnings focus this week has been on US retail with Walmart, Home Depot, Target, Lowe’s and Macy’s all reporting.
US retail has clearly been seeing the benefits of pent-up demand, the expansion of the vaccine rollout, and stimulus spending. The latest first quarter results showed very strong sales and earnings growth YoY, with numbers beating consensus, and retailers raising their guidance for the year.
Consumer spending is growing at an annual rate of over 10%, as people put to work the US$2.0 trillion-plus of extra savings accumulated in the past year and some of this is flowing through to the retailers. However, this is also causing problems with supply chains and while Home Depot noted the benefits of unprecedented demand for home improvement projects it also warned that price inflation was a factor in many product categories, particularly lumber.
Investors remained only moderately impressed with the results, with Target and Walmart the slight outperformers and the share prices of the other three largely moving in line with the market. While the retail sector is expected to benefit this year from the COVID bounce, the longer-term competitive and structural issues of e-commerce remain. The Dow Jones Retail Index is up 35% in the past 12 months, compared with a 41% increase for the Dow Jones Industrial Average Index.
The retail giants are not standing still though and are starting to fight back with particularly strong e-commerce sales growth across channels in the first quarter; Walmart (+37%), Home Depot (+27%), Target (+50%), and Macy’s (+34%). On a two-year measure, e-commerce sales for Walmart, Target, and Home Depot have more than doubled.
Macy’s was particularly upbeat noting that “our core customers are shopping again, and we continue to attract new customers, who increasingly begin their shopping experience with us online”.
The largest company in the sector, Walmart [NYSE:WMT] reported first quarter total revenue of US$138.3 billion (+2.7% YoY) and adjusted EPS of US$1.69 (+43.2%). Sales beat market consensus by 5% and adjusted earnings beat by 40%.
The world’s largest home improvement retailer with retail stores in all 50 US states, Home Depot [NYSE:HD], reported sales of US$37.5 billion (+33% YoY) for the first quarter, and net earnings of US$3.86 per share (+85%). Sales beat market consensus by 9% and earnings beat by 27%.
Lowe’s [NYSE:LOW] announced sales of US$24.4 billion (+24% YoY) and earnings of US$3.22 per share (+83%) for the period. Sales beat market consensus by 3% and earnings beat by 25%.
Target [NYSE:TGT] reported sales of US$23.9 billion (+23% YoY) for the first quarter, and adjusted earnings of US$3.69 per share (+525%). Sales beat market consensus by 11% and earnings beat by 70%.
Macy’s [NYSE:M] reported sales of US$4.7 billion (+56% YoY) for the first quarter, and net earnings of US$0.33 per share (compared with a loss of US$11.53). Sales beat market consensus by 10% and the market was expecting an earnings loss of US$0.38 per share.