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The overall second-quarter earnings picture for the retail sector has been impressive. Total earnings from 96.2% of the sector’s total market capitalization reported so far are up 17.3% on 4.8% higher revenues, with 62.1% beating EPS estimates and 44.8% beating revenue estimates.
However, this is a weaker performance relative to the last few quarters, with second-quarter earnings growth turning negative once Amazon’s (AMZN) numbers are excluded. The beat ratios mark a new low over the preceding 20-quarter period.
Most of the big-box retailers came up with an earnings or revenue beat or both. The results had a mixed impact on retail ETFs. SPDR S&P Retail ETF (XRT - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) and Amplify Online Retail ETF (IBUY - Free Report) have gained 0.7%, 2.2% and 0.6%, respectively, over the past month, while ProShares Online Retail ETF (ONLN - Free Report) shed 3.1% (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart (WMT - Free Report) reported robust second-quarter fiscal 2025 results, surpassing earnings and revenue estimates. Earnings per share came in at 67 cents, outpacing the Zacks Consensus Estimate of 65 cents and improving 9.8% from the year-ago quarter. Revenues rose 4.8% year over year to $169.3 billion and topped the consensus mark of $168.5 billion.
The mega-retailer upped fiscal 2025 guidance. It now expects revenues to increase 3.75%-4.75%, up from the prior outlook of 3%-4%, and earnings per share in the range of $2.35-$2.43, up from the prior guidance of $2.23-$2.37. For third-quarter fiscal 2025, Walmart expects sales to grow 3.25%-4.25% and adjusted earnings per share in the range of 51-52 cents (read: ETFs to Gain on Walmart's Robust Q2 Earnings).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, also reported better-than-expected earnings. Earnings per share surpassed the Zacks Consensus Estimate by 13 cents and revenues beat the mark by $601 million. The retailer anticipates sales to increase 2.5-3.5% year over year for fiscal 2024, including $2.3 billion of sales contribution from the 53rd week.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 14 cents but missed the same for revenues by $321 million. It slashed the revenue guidance from $84-$85 billion to $82.7-$83.2 billion and earnings per share guidance from $12.00-$12.30 to $11.70-$11.90.
Big-box retailer Target (TGT - Free Report) surpassed the Zacks Consensus Estimate for earnings by 41 cents and for revenues by $244 million. The retailer foresees adjusted earnings in the range of $2.10-$2.40 per share for the third quarter of fiscal 2024. It expects adjusted earnings per share of $9.00-$9.70 compared with $8.94 reported in the year-ago period.
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 77 stocks in its basket, with none making up for more than 2% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, apparel retail, specialty stores, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $390 million and an average trading volume of 4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with double-digit exposure, while the other firms hold no more than a 9.6% share.
VanEck Vectors Retail ETF has amassed $214.7 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 4,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Amplify Online Retail ETF offers global exposure to publicly traded companies with significant revenues from the online retail business, traditional online retail, online travel, online marketplace and omni-channel retail by tracking the EQM Online Retail Index. IBUY holds 77 stocks in its basket, with none accounting for more than 4.5% of the assets. Amplify Online Retail ETF has the largest allocation, 39% in online retail and 38% in online marketplace.
Amplify Online Retail ETF has attracted $156 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 11,000 shares.
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels and then zeroes in on companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 18 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 7.2% of the assets. American firms make up 76% of the portfolio, while Ireland firms account for a 7.2% share (read: Amazon's Weak Sales Spoil Investors' Mood: ETFs in Focus).
ProShares Online Retail ETF has accumulated $89.1 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 12,000 shares.
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A Look at Retail ETFs Post Q2 Earnings
The overall second-quarter earnings picture for the retail sector has been impressive. Total earnings from 96.2% of the sector’s total market capitalization reported so far are up 17.3% on 4.8% higher revenues, with 62.1% beating EPS estimates and 44.8% beating revenue estimates.
However, this is a weaker performance relative to the last few quarters, with second-quarter earnings growth turning negative once Amazon’s (AMZN) numbers are excluded. The beat ratios mark a new low over the preceding 20-quarter period.
Most of the big-box retailers came up with an earnings or revenue beat or both. The results had a mixed impact on retail ETFs. SPDR S&P Retail ETF (XRT - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) and Amplify Online Retail ETF (IBUY - Free Report) have gained 0.7%, 2.2% and 0.6%, respectively, over the past month, while ProShares Online Retail ETF (ONLN - Free Report) shed 3.1% (see: all the Consumer Discretionary ETFs here).
Let’s dig into the details of some of the earnings releases.
Earnings in Focus
Walmart (WMT - Free Report) reported robust second-quarter fiscal 2025 results, surpassing earnings and revenue estimates. Earnings per share came in at 67 cents, outpacing the Zacks Consensus Estimate of 65 cents and improving 9.8% from the year-ago quarter. Revenues rose 4.8% year over year to $169.3 billion and topped the consensus mark of $168.5 billion.
The mega-retailer upped fiscal 2025 guidance. It now expects revenues to increase 3.75%-4.75%, up from the prior outlook of 3%-4%, and earnings per share in the range of $2.35-$2.43, up from the prior guidance of $2.23-$2.37. For third-quarter fiscal 2025, Walmart expects sales to grow 3.25%-4.25% and adjusted earnings per share in the range of 51-52 cents (read: ETFs to Gain on Walmart's Robust Q2 Earnings).
Home Depot (HD - Free Report) , the world's largest home improvement retailer, also reported better-than-expected earnings. Earnings per share surpassed the Zacks Consensus Estimate by 13 cents and revenues beat the mark by $601 million. The retailer anticipates sales to increase 2.5-3.5% year over year for fiscal 2024, including $2.3 billion of sales contribution from the 53rd week.
Meanwhile, the second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by 14 cents but missed the same for revenues by $321 million. It slashed the revenue guidance from $84-$85 billion to $82.7-$83.2 billion and earnings per share guidance from $12.00-$12.30 to $11.70-$11.90.
Big-box retailer Target (TGT - Free Report) surpassed the Zacks Consensus Estimate for earnings by 41 cents and for revenues by $244 million. The retailer foresees adjusted earnings in the range of $2.10-$2.40 per share for the third quarter of fiscal 2024. It expects adjusted earnings per share of $9.00-$9.70 compared with $8.94 reported in the year-ago period.
Retail ETFs in Focus
SPDR S&P Retail ETF (XRT - Free Report)
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 77 stocks in its basket, with none making up for more than 2% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, apparel retail, specialty stores, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $390 million and an average trading volume of 4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
VanEck Vectors Retail ETF (RTH - Free Report)
VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with double-digit exposure, while the other firms hold no more than a 9.6% share.
VanEck Vectors Retail ETF has amassed $214.7 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 4,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Amplify Online Retail ETF (IBUY - Free Report)
Amplify Online Retail ETF offers global exposure to publicly traded companies with significant revenues from the online retail business, traditional online retail, online travel, online marketplace and omni-channel retail by tracking the EQM Online Retail Index. IBUY holds 77 stocks in its basket, with none accounting for more than 4.5% of the assets. Amplify Online Retail ETF has the largest allocation, 39% in online retail and 38% in online marketplace.
Amplify Online Retail ETF has attracted $156 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 11,000 shares.
ProShares Online Retail ETF (ONLN - Free Report)
ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels and then zeroes in on companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 18 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 7.2% of the assets. American firms make up 76% of the portfolio, while Ireland firms account for a 7.2% share (read: Amazon's Weak Sales Spoil Investors' Mood: ETFs in Focus).
ProShares Online Retail ETF has accumulated $89.1 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 12,000 shares.