Retail stocks are seeing somewhat of a reprieve today on the heels of mixed earnings out of the sector.
The Retail SPDR ETF (XRT) +0.5% had been down 11% month-to-date.
The retail sector continues to face stiff secular headwinds brought on by eCommerce.
Amazon (AMZN) led the charge online, which led Walmart (WMT) to essentially go all-in with its eCommerce efforts.
Specialty retailers have been forced to adapt to changing consumer preferences. These smaller outfits with less scale have struggled to offset lower foot traffic, as online investments take time and come with lower margins.
What's more, tariffs and the threat of further tariffs are pressuring margins or forcing some to source production outside of China.
AS a result, retail stocks have underperformed this year. The XRT ETF has moved down 0.6% versus a concurrent 12% increase in the S&P 500. A broad group of retailers trade at 14x earnings estimates on average vs. the S&P 500 at ~16.5x.
There are a number of retailers reacting to earnings this session:
- Strength in the dollar stores following earnings this morning
shows that discounters are still having success while consumers continue to look for value.
- Dollar Tree (DLTR) +3% reported first quarter results in-line with guidance. The company offered second quarter guidance in-line with estimates and reaffirmed its same store sales outlook. Management said that it is capable of mitigating tariff impacts.
- Dollar General (DG) +7% beat first quarter estimates. Earnings grew 9% as comparable store sales beat estimates for the fourth consecutive quarter, up 3.8%. The company reaffirmed EPS and sales guidance for the year.
- Another discounter, Burlington Stores (BURL) +6%,is trading higher despite tepid first quarter results. Burlington lowered its first quarter outlook last month when it announced CEO Thomas Kingsbury will be stepping down. Former Ross Stores (ROST) COO Michael O'Sullivan will take the reins in September. This morning, the company reported same store sales +0.1%, at the bottom end of its lowered range, while EPS came in above its lowered range and in the middle of its original range from early March. The company lowered the high end of FY19 EPS to $6.93-7.01 from $6.93-7.06 and lowered comparable store sales guidance to growth of 1.3-2.1% from 1.5-2.8%. Encouragingly, guidance for the second quarter was in-line with expectations. Burlington said that tariffs aren't having an impact on the company and could even benefit its business model if supply chains are disrupted or prices go up for competitors.
- Designer Brands (DBI) +12% is higher after the company beat adjusted earnings by a penny (+10% yr/yr) with comparable store sales up by 3%, 70 basis points better than expected. The company, formerly known as DSW, raised FY19 EPS to $1.87-1.97 from $1.80-1.90 and reaffirmed its outlook for low single-digit comparable store sales growth. In March, the company set a $2.65-2.75 EPS target for 2021 when it changed its name and ticker.
- Specialty apparel retailer Express (EXPR) -0.5% reported a smaller than expected net loss. Gross margins beat estimates but still fell by 280 basis points yr/yr. Comparable store sales including ecommerce fell 9%, at the better end of (10)-(9)% guidance. Guidance for the second quarter, a modest net loss with comps down 6-8%, were in-line with expectations.
- PVH (PVH) -13% hit its lowest levels in more than two years this morning after beating first quarter EPS by a penny on in-line revenue (+2% or +6% ex-FX). The maker of Tommy Hilfiger and Calvin Klein apparel guided second quarter EPS and revenue just below consensus and lowered FY20 EPS by $0.10 due to additional foreign exchange headwinds. The company said that traffic will have a $0.05 impact on the year while noting softness in China and the US retail market.
- Women's apparel retailer J. Jill (JILL) -52% has gotten cut in half after missing estimates and guidance down. The company reported first quarter EPS down 66% and sales down 3% and guided for a second quarter net loss, with sales down 1-3%. The company cut its earnings guidance by 75% for the full year while lowering its sales forecast to down 2-4% from prior expectations for a slightly positive performance.
- Tilly's (TLYS) -13% hit a near two-year low after reporting in-line EPS on higher than expected revenue. The apparel retailer warned that comps were down 6.6% quarter-to-date due to the unseasonably cold weather in May, which led to poor guidance for the second quarter.