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Retail ETFs to Gain on Q3 Earnings Wave

The overall earnings picture for the retail sector this earnings season has been robust. Total earnings from 94.7% of the sector’s total market capitalization reported so far are up 8.4% on 11% higher revenues, with 85.2% beating EPS and revenue estimates.

While the proportion of these companies beating third-quarter EPS and revenue estimates is below the preceding quarter, the beat percentages are nevertheless tracking historical averages. Third-quarter earnings reflect a modest contraction in margins as a result of supply chain issues and inflationary pressures (see: all the Consumer Discretionary ETFs here).  

SPDR S&P Retail ETF XRT, VanEck Vectors Retail ETF RTH, First Trust Nasdaq Retail ETF FTXD, Amplify Online Retail ETF (IBUY) and ProShares Online Retail ETF ONLN are poised to gain from the upbeat earnings.  

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

Earnings in Focus

The second-largest department store retailer, Macy’s M emerged as one of the biggest winners, skyrocketing about 21.2% — its largest one-day percentage gain in decades — following its earnings release. It beat earnings estimates by 88 cents. Revenues outpaced the consensus estimate by $113 million. Macy’s raised its outlook for fiscal 2021. The company expects sales to be in the range of $24.12-$24.28 billion, up from the previous guidance of $23.55-$23.95 billion and adjusted earnings in the range of $4.57-$4.76 compared with the prior projection of $3.41-$3.75 per share.

Leading departmental store Kohl’s KSS soared 10.6% following the blowout results and stronger-than-expected guidance. Kohl’s posted adjusted earnings of $1.65 per share, beating the Zacks Consensus Estimate by 96 cents. Revenues of $4.6 billion topped the consensus mark of $4.57 billion. The retailer raised its guidance for fiscal 2021. Management now expects net sales to grow in the mid-twenties percentage range, up from the previous projection of low-twenties percentage rate growth.

Home Depot HD, the world's largest home improvement retailer, gained 5.7% in response to its earnings. Earnings per share of $3.92 surpassed the Zacks Consensus Estimate by 51 cents and revenues outpaced the same by $1.8 billion. Meanwhile, the second-largest home improvement retailer, Lowe’s LOW beat estimates for earnings by 40 cents and revenues by $1 billion. Notably, the company delivered the 10th straight earnings beat and the seventh consecutive sales surprise. Lowe’s raised its revenue guidance to nearly $95 billion from the prior prediction of $92 billion (read: Home Depot Rises Post Q3 Earnings: ETFs to Buy).

Big-box retailer, Target TGT, topped the Zacks Consensus Estimate for earnings and revenues by 16 cents and $746 million, respectively. The company has surpassed the earnings estimates every time since the October quarter of 2018.

The world's largest retailer, Walmart WMT, topped earnings estimates by 6 cents and revenue estimates by $4.8 billion. Walmart raised its annual earnings per share view to $6.40 from the previous expectation of $6.20-$6.35 for fiscal 2022 (read: ETFs to Gain on Strong Q3 Walmart Earnings).

ETFs in Focus

Below we have highlighted ETFs in detail:  

SPDR S&P Retail ETF (XRT)

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 a well-diversified 107 stocks in its basket with none making up for more than 1.73% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in Internet & direct marketing retail, apparel retail, automotive retail and specialty stores.

SPDR S&P Retail ETF is the largest and most popular in the retail space with AUM of $1.4 billion and an average trading volume of 2.7 million shares. It charges 35 basis points (bps) in annual fees and has shed 1.4% in a week. SPDR S&P Retail ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 25 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 two firms with double-digit exposure each while the other firms hold no more than 5.6% share.

VanEck Vectors Retail ETF has amassed $252.8 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 18,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 ETFs to Buy This Holiday Season for Gift of Good Returns).

First Trust Nasdaq Retail ETF (FTXD)

First Trust Nasdaq Retail ETF follows the Nasdaq US Smart Retail Index. It holds 51 stocks in its basket with each accounting for no more than 7.8% of assets. First Trust Nasdaq Retail ETF is slightly skewed toward specialty retail at 40%, while diversified retailers round off the next spot with double-digit exposure.

First Trust Nasdaq Retail ETF has accumulated $25.2 million in its asset base and has an expense ratio of 0.60%. It trades in an average daily volume of 8,000 shares. First Trust Nasdaq Retail ETF carries a Zacks ETF Rank #3 (Hold).

Amplify Online Retail ETF (IBUY)

Amplify Online Retail ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. IBUY holds 79 stocks in its basket with none accounting for more than 2.3% of assets. Amplify Online Retail ETF has the largest allocation in traditional retail at 53.6% followed by 36.6% in the marketplace.

Amplify Online Retail ETF has attracted $871.9 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 58,000 shares.

ProShares Online Retail ETF (ONLN)

ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeroing in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms while other firms hold no more than 4.3% of assets. American firms make up three-fourth of the portfolio, while Chinese firms account for 17.4% share.

ProShares Online Retail ETF has accumulated $823.1 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 73,000 shares.


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Macy's, Inc. (M): Free Stock Analysis Report
 
Target Corporation (TGT): Free Stock Analysis Report
 
Kohl's Corporation (KSS): Free Stock Analysis Report
 
Walmart Inc. (WMT): Free Stock Analysis Report
 
Lowe's Companies, Inc. (LOW): Free Stock Analysis Report
 
The Home Depot, Inc. (HD): Free Stock Analysis Report
 
SPDR S&P Retail ETF (XRT): ETF Research Reports
 
VanEck Retail ETF (RTH): ETF Research Reports
 
First Trust NASDAQ Retail ETF (FTXD): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
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