Retail Recap: The Good, The Bad, And The Future

By: Spencer Israel

The July retail sales report released on August 14 gave a massive hint of what was to come from retail earnings this week. 

According to the Census Bureau, sales at non-store retailers (which include online retailers like Amazon) rose nearly 20% year-over-year in July. And as Bloomberg noted, sales from that group, building material retailers, and auto supply retailers all accounted for a greater share of total retail sales in July than before Covid-19 hit the U.S. in February. Meanwhile, sales at restaurants and clothing retailers have fallen dramatically. 

In other words: expect big results from home supply companies (like Home Depot and Lowe’s), auto parts retailers (like Advanced Auto Parts), and companies with a strong e-commerce presence (like Target and Walmart); expect bad results from mall-based retailers.  

Fast forward a few days, and those expectations have been met—if not exceeded. 

Tuesday morning saw a trio of big earnings beats foreshadowed by the retail sales report. 

Home Depot reported a record-breaking quarter in terms of revenue, while U.S. comparable sales—the measure of revenue from stores open at least 12 months as of the end of the quarter—rose 25% year-over-year. 

Advanced Auto Parts then proceeded to report earnings well above analyst expectations, as comparable sales grew 7.5%—nearly 3x the consensus estimate. 

Walmart followed that up with a massive earnings beat of its own, reporting both earnings and revenue well above analyst estimates on the back of a 97% year-over-year increase in e-commerce sales. 

Target reported the third-highest quarterly revenue figure in company history, and a record 24% comparable sales to boot. Lowe’s kept up with Home Depot, reporting a 30% increase in revenue and a 135% increase in e-commerce sales.
Wednesday morning brought the same story with Target and Lowe’s. 

But it wasn’t all pretty. As expected, it was a much uglier quarter for the clothing-based retailers. 

Kohl’s reported negative earnings per share for the second straight quarter on Tuesday morning, while TJX Companies did the same on Wednesday.

Digesting The Data
But if fundamental earnings data tell one story in these companies, the stock reactions tell another.

Stock Premarket High* Market Close**
HD +3% -4%
AAP +6% -5%
WMT +6% -7%
KSS +5% -19%
TGT +9% +2%
LOW +3% -2%
TJX +2% -7%

And while it’s not unusual to see stocks come down from premarket highs (or come up off premarket lows) after the opening bell, the extent to which these stocks reversed in the hours after their reports highlights the fact that a) retail stocks that rallied significantly into earnings should be approached with caution, and b) the market remains extremely tepid about clothing-based retailers. With the exception of Target (which hit a new all-time high on Wednesday), the other stocks in the group were all bid up heavily in the premarket only to give back all those gains in the regular session. 

Looking Ahead
Off-price retailer Ross Stores will be the next major retailer to take the earnings stage when it reports Thursday afternoon. They will be followed by Foot Lockerwho pre-reported a stunningly good 18% Q2 same-stores sales figure on August 10—on Friday morning. 

In the ensuing weeks we’ll also hear from Nordstrom (8/25), Dick’s Sporting Goods (8/26), Dollar General and Burlington (8/27), and Macy’s (9/2). Costco and Nike are also expected to report in September, though neither has confirmed a date. 

The author is long the S&P 500 in his retirement accounts.

Active Trading with Lightspeed
Lightspeed provides professional traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer an optimal user experience. With the intuitive interface layouts and institutional quality stock and options scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.

For more information on a professional trading platform with Lightspeed, please call us at 1-888-577-3123, request a demo or to open an account.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.

You may also be interested in...

The IPOX® Week, January 10th, 2022
Read More
The IPOX® Week, January 3rd, 2022
Read More
The IPOX® Week, December 27th, 2021
Read More
Timing Is Everything For Successful Traders
Read More

Try the demo

Compare Platforms
Check the background of this firm on FINRA's BrokerCheck

Our website uses cookies to improve the performance of our site, to analyze the traffic to our site, and to personalize your experience of the site. You can control cookies through your browser settings. Please find more information on the cookies used on our site in our Privacy Policy. By clicking OK, you agree to allow us to collect information through cookies.