Wednesday, May 20, 2015

Markets slide lower on weak retail earnings

Dow crawled up 4, decliners barely ahead of advancers & NAZ was off 2.  The MLP index lost 1+ to the 443s & the REIT index was down a fraction to the 323s.  Junk bond funds were flat to lower & Treasuries saw more selling.  Oil rebounded after recent selling & gold was a tad higher.

AMJ (Alerian MLP Index tracking fund) 

CLN15.NYM...Crude Oil Jul 15...58.61 Up ...0.62 (1.1%)

GC.CMX.........Gold Jun 15.....1,209.20 Up ...2.50 (0.2%)

3 Stocks You Should Own Right Now - Click Here!

Target, a Dividend Aristocrat, reported a better-than-expected 52% increase in profit in Q1 as its stores attracted more shoppers who spent more on average.  The company also boosted the bottom end of its full-year outlook by 5¢, now calling for EPS of $4.50-$4.65.   For Q2, TGT forecast $1.04-$1.14, while analysts had estimated $1.12.  CEO Brian Cornell said that in Q1, the company saw strong sales growth in its apparel, home & beauty categories, while digital sales also grew about 38%.  The company is trying to dig itself out of a hole left from several years of disappointing results, when the retailer failed to distinguish itself with enough hip products & found itself trying to stand out with lower prices on commodities goods like toilet paper & laundry detergent.  Now TGT has been working to place more focus on signature categories like fashion, furniture, baby goods & beauty products.  In the latest qtr, sales excluding newly opened & closed stores rose 2.3%, narrowly topping its Feb projection for growth of 2%.  The increase was driven by a 0.9% uptick in number of transactions & a 1.4% increase in average transaction value.  In all, TGT posted EPS of 98¢, compared with 66¢ a year earlier.  EPS from continuing operations, excluding one-time items, was $1.10.  The company had forecast EPS of 95¢-$1.05, while analysts were looking for $1.03.  Net sales grew 2.8% to $17.1B, meeting expectations.  TGT booked $16M in after-tax losses in the qtr related to exiting its Canada business & spent $3M related to its data breach.  The stock went up 46¢.  If you would like to learn more about TGT, click on this link:

Solid Sales Growth Drives Target to 1Q Beat

Target (TGT)

Lowe's  reported lower-than-expected quarterly profit & sales as growth in its kitchen, flooring & lumber & building material businesses was not as strong as the company expected & below analysts' estimates.  Same-store sales rose 5.2% & analysts on average had expected a 6.1%.  LOW maintained its full-year comparable sales growth forecast of 4.0-4.5%, but some analysts said this could be tough to achieve.  EPS rose to 70¢ from 61¢ a year earlier.  Net sales rose 5.4% to $14.13B.  The stock fell 2.96.  If you would like to learn more about TGT, click on this link:

Slowing Homebuilding Material Sales Hit Lowe's Profit

Lowe's (LOW)

Staples reported a 39% decline in Q1 profit, as sales continued to decline & store traffic dwindled, deepening the chain's challenges as it awaits regulatory approval for its takeover of rival Office Depot.  CEO Ron Sargent called results in line with the company's expectations.  "We grew sales in our North American delivery businesses and stabilized profitability across the company, which reflects continued progress on our strategic reinvention," he added.  For Q2, SPLS expects to earn 11-13¢ & said sales will fall by an unspecified amount.  The guidance excludes expected merger-related costs.  Analysts are looking for 11¢ on $5.1B in revenues.  Analysts' revenue estimate translates to a 2.6% expected decline from a year earlier.  Earlier this year, SPLS agreed to buy Office Depot for $6.3B.  It has been hit by shifts in office needs where basics are no longer in high demand & where discounters & web retailers have invaded their turf.  Both chains have suffered from declining sales for nearly a decade.  In North America, the company suffered a 5% sales drop at stores open at least a year, excluding the effect of currency-exchange rates, its 12th straight qtr of sales declines.  Total North American sales dropped 10%.  The company said sales were negatively affected by store closures & currency rates.  Store traffic fell 2%, & the average order size declined 3%.  Online sales grew 3% on a constant-currency basis, but that wasn't enough to offset the declines in the chain's store base.  A 7% decline in European same-store sales helped drive a 19% drop in the company's intl revenue.  In all for Q1, EPS was 9¢, down from 15¢ a year earlier.  Excluding certain items, like charges stemming from the Office Depot acquisition & other restructuring charges, EPS fell to 17¢ from 18¢.  Revenue slid 6.9% to $5.3B.  Analysts projected EPS of 17¢ & $5.5B in sales.  The stock lost 30¢.  If you would like to learn more about SPLS, click on this link:

Staples Reveals 39% Drop in 1Q Profit

Staples (SPLS)

Retail earnings were nothing to write home about, as expected.  The Greek debt mess drones on with plenty of talk but no action.  In the PM, minutes from the last FOMC meeting will be released.  That will likely provide little new information about when rate hikes are coming, especially because the members don't know.  The stock averages continue to stay close to their record highs.

Dow Jones Industrials

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