A Big Box Surprise

Yesterday we discussed investors’ fear that expectations may still be too high ahead of the holiday shopping season. Layoffs at Amazon and FedEx sparked speculation that retailers could be due for a rude awakening.

However, today’s Walmart and Home Depot results painted a slightly different picture. 🖼️

First up, big-box retailer Walmart reported earnings and revenue above expectations. Its adjusted earnings per share of $1.50 beat the $1.32 expected, while revenues of $152.81 billion exceeded the $147.75 billion expected.

Strength in its grocery department helped drive its overall 9% sales growth. The company reiterated that customers across income levels continue to favor lower-priced grocery items over discretionary items like electronics, apparel, etc. Meanwhile, a strong back-to-school season and successful promotions in its international markets also boosted sales. 🛒

With its online sales growth, the company’s ad business also saw a boost, rising 30% YoY. Walmart continues to rely on this and other new products, like its third-party marketplace, to help drive longer-term growth.

The company reiterated much of what we already knew regarding the consumer’s overall health. Consumers are being pinched by inflation, causing them to act with more discretion when spending money and trading down to lower-priced alternatives. With that said, the company noted the current quarter is “off to a pretty solid start.”

Overall though, Walmart feels like it’s well-positioned for the holidays. It’s worked through a lot of its excess inventory and has strong promotions planned to entice shoppers. Now it just has to hope that the global economy holds it together enough, so people continue shopping.

The better-than-expected news helped lift $WMT shares by nearly 7% today. 👍

Turning to Home Depot, the company also beat on the top and bottom lines. Its adjusted earnings per share of $4.24 beat the $4.12 expected. Revenues of $38.87 billion exceeded the $37.96 expected.

Driving its 6% sales increase was positive growth in both its professional and do-it-yourself categories. The company says their professional customers’ backlogs remain strong and that the typical DIY-er customer can still afford home improvement projects. 💪

While inflation drove average ticket prices up 9%, it also pressured the company’s gross margin to fall to 34%. Like other retailers and shippers, transaction volumes were down 4%, but were offset by higher average prices.

Despite the challenges, the company remains confident heading into its key holiday quarter. It reaffirmed its full-year guidance despite the macroeconomic backdrop weakening. Whether or not they’ll be right about the consumers’ resilience remains to be seen.

$HD shares were up marginally on the day as investors digested the news. 📈

Don’t forget – tomorrow we’ll hear additional earnings insights from these companies’ competitors, Target and Lowe’s, before the opening bell.

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Earnings Recap – 03/02/23

It’s another earnings-packed issue, so let’s quickly review some of the biggest after-hours movers. 👀

First up is the electric vehicle charging company ChargePoint Holdings. Its adjusted loss per share of $0.23 and revenues of $152.8 million missed the expected $0.19 per share loss and $165 million in revenues. The company blamed supply challenges for its miss and guided for first-quarter revenue of $122 to $132 million. $CHPT shares are down 13% on the news. ⚡

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Foot Locker Loses Its Footing

It’s a challenging environment for retailers, especially those of a discretionary nature. And unfortunately, sneaker and athletic apparel retailer Foot Locker is not immune to these challenges.

The company reported a decline in holiday-quarter profits. Its adjusted earnings per share of $0.97 were down from $1.46 the previous year. Meanwhile, revenues of $2.34 billion were also marginally lower than in 2021. 🔻

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