A Look at Retail ETFs Post Q1 Earnings

The overall earnings picture for the retail sector has been weak due to COVID-19 driven lockdowns. Total earnings from 95.9% of the sector’s total market capitalization reported so far are down 17.7% on 7% higher revenues with 58.6% of the companies beating on earnings and 79.3% exceeding top-line estimates.

Although earnings and revenue growth as well as earnings beat ratio are historically lower for the same group of retailers, the revenue beat ratio is much higher. However, retailers withdrew fiscal guidance due to the uncertainty surrounding the coronavirus pandemic (read: 4 ETFs to Profit From E-Commerce Sales Boom).

Let’s dig into the details of some of the earnings releases.

Earnings in Focus

The second-largest home improvement retailer, Lowe’s LOW beat earnings estimates by 48 cents and revenues by $1.4 billion. This represents the fourth straight quarter of an earnings beat and a top-line beat after two consecutive quarters of misses. The stock jumped 3.2% in response to its earnings announcement. Meanwhile, shares of Home Depot HD, the world's largest home improvement retailer, plunged 2.9% in response to its earnings announcement. Earnings per share of $2.08 missed the Zacks Consensus Estimate of $2.26 while revenues outpaced the consensus mark by $649 million.

One of the leading departmental stores, Kohl’s KSS lost the most. The stock has tumbled nearly 11% following lackluster first-quarter fiscal 2020 results. The company posted adjusted loss of $3.20 per share, wider than the Zacks Consensus Estimate of loss of $1.79. Revenues of $2.43 billion also came in below the Zacks Consensus Estimate of $2.62 billion.

Big-box retailer Target TGT topped the Zacks Consensus Estimate for earnings by 13 cents and for revenues by $515 million. The company has surpassed earnings estimates every time since the October quarter of 2018. However, the share price of TGT fell 3.6% following the earnings announcement.

The world's largest retailer, Wal-Mart WMT, topped earnings estimates by 8 cents and revenue estimates by $666 million. It set a record in online sales as millions of consumers stocked up on food and cleaning supplies. However, the share price of WMT fell 1.7% in response to its earnings announcement (read: Walmart Delights Investors: ETFs in Focus).

ETFs in Focus

That said, a slew of earnings and revenue beat drove the retail space and ETFs higher from a one-month look. Below, we have highlighted six ETFs in detail that should be in focus in the weeks ahead (see: all the Consumer Discretionary ETFs here):  

Amplify Online Retail ETF IBUY

This ETF has attracted $367.8 million to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 47 stocks, each accounting for less than 3.8% of the assets. IBUY gained 20.1% in a month.

ProShares Online Retail ETF ONLN

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 24 stocks in its basket with the highest concentration on the top firm – Amazon (AMZN). American firms make up three-fourth of the portfolio, while China accounts for 23.8% share. ONLN has accumulated $127.4 million in its asset base and charges 58 bps in annual fees. It is up 9.6% in a month.

SPDR S&P Retail ETF XRT

With AUM of $318.3 million, this product tracks the S&P Retail Select Industry Index, holding 87 securities in its basket with each accounting for no more than 3.2% of assets. Internet & direct marketing retail takes the largest share at 25.3% while apparel retail, automotive retail, and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 bps in annual fees and has gained 9.3% in a month. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Retail Sales Worst in April: Least & Most Hurt Sector ETFs).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon at 25.1% and Home Depot at 10.1% — while the other firms hold no more than 9.21% share. The product has amassed $97.3 million in its asset base and charges 35 bps in annual fees. RTH has added 5.1% in a month and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

First Trust Nasdaq Retail ETF FTXD

The fund follows the Nasdaq US Smart Retail Index and holds 51 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 9.3% of the assets. FTXD has accumulated $3.4 million in its asset base and has an expense ratio of 0.60%. The ETF has jumped 7.2% in a month and has a Zacks ETF Rank #3.

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Target Corporation (TGT) : Free Stock Analysis Report
 
The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
 
Kohls Corporation (KSS) : Free Stock Analysis Report
 
SPDR SP Retail ETF (XRT): ETF Research Reports
 
VanEck Vectors Retail ETF (RTH): ETF Research Reports
 
Amplify Online Retail ETF (IBUY): ETF Research Reports
 
First Trust NASDAQ Retail ETF (FTXD): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
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