When Wal-Mart Stores Inc. (NYSE: WMT) reported results last week, the mega-retailer posted EPS of $1.24 on revenues of $116.2 billion, compared with the consensus estimates of $1.25 on revenues of $118.47.
Walmart chopped its outlook for the third quarter and the full year, and today Target said its full-year EPS would come in at the low-end of its previous guidance of $4.70 to $4.90. Both stores have cited cautious spending by consumers who face tighter budgets going forward.
That is part of the story, but not all of it. Take a look at the results from Lowe’s Companies Inc. (NYSE: LOW) and Home Depot Inc. (NYSE: HD). Both posted nice gains and raised their full-year outlooks. And both stores noted that sales were solid in all departments.
What consumers have spent money on are home improvement items, appliances, smartphones and other electronic gear. The big-ticket stuff — home improvement items and appliances — are not offered at either Target or Walmart. Best Buy Co. Inc. (NYSE: BBY) specifically noted that appliance sales experienced strong growth in the second quarter, helping the company to confound nearly everyone with its big earnings beat on Tuesday.
Both Lowe’s and Home Depot raised their outlooks as they expect customers to continue to invest in their homes. Target and Walmart, which sell a lot of discretionary items, have reined in their outlooks, probably recognizing that if consumers are going to spend on discretionary goods it is not going to be on the stuff these stores sell.
More retailers are having a rough quarter than are having a good one. According to Retail Metrics, the projected blended earnings growth from the retail sector has fallen from 10.3% last week to 6.6% as of Tuesday, and that retailers the firm tracks that already have reported earnings have missed expectations by an average of 2.1%. And that decline includes Home Depot.
These numbers do not suggest a banner year for the back-to-school season, and the set-up for this year’s holiday season is not looking too good either. For consumers this could mean steeper discounts after the back-to-school season and earlier discounts going into the holiday season. Good for consumers, not so good for retailers.
Target’s shares are trading down 2.2% early trading, at $66.41 in a 52-week range of $58.01 to $73.50. The consensus price target from Thomson Reuters was around $73.80 before today’s results were announced.
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
