Two weeks ago, I reviewed April’s retail sales report. The bottom line: It was pretty disappointing.
The pace of inflation came in at 4.9% year-over-year in April, while retail sales have only risen 1.6% over the past 12 months. So, the U.S. consumer is feeling the pressure caused by inflation…
And as we learned from a round of retailers’ quarterly results, some are feeling the effects of cautious consumers.
So, in today’s Market 360, let’s review four of these retailers’ earnings. Then, I’ll share which sector to consider investing in instead.
Let’s dig in…
Retailers Report Mixed Results
Nordstrom, Inc. (JWN) reported first-quarter earnings on Wednesday, May 31. The company announced earnings of $0.07 per share, up from an earnings loss of $0.06 per share in the same quarter a year ago and beating analysts’ estimates for an earnings loss of $0.08 per share. Revenue fell 11% year-over-year to $3.18 billion, but it also topped analysts’ expectations for revenue of $3.12 billion.
For the fiscal first quarter, the company reported a net loss of $205 million, or $1.27 per share, compared with a net income of $20 million, or $0.13 per share, in the same quarter last year.
Nordstrom also maintained its full-year outlook. It expects revenue to fall 4% to 6% but expects adjusted earnings per share between $1.80 and $2.20.
In the company’s earnings release, CEO Erik Nordstrom said:
We are pleased with the progress we’re making against the key priorities we laid out for 2023 as we continue to enhance our overall customer experience, improve Nordstrom Rack performance, increase inventory productivity and optimize our supply chain operations … We’re encouraged by our momentum, especially given the uncertain macroeconomic environment.
Shares of the company jumped 8.1% at the market open on Thursday.
Macy’s, Inc. (M) released its first-quarter earnings before the opening bell on Thursday, June 1. As I mentioned, Macy’s has experienced a customer pullback – and the company is feeling the consequences.
Macy’s reported earnings per share of $0.56 and revenue of $4.98 billion, falling 48% and 7% year-over-year, respectively. Analysts expected earnings of $0.45 per share and revenue of $5.04 billion.
For the full year, the department store expects adjusted earnings per share between $2.70 and $3.20, down from the previous range of $3.67 to $4.11. The company also expects sales between $22.8 billion and $23.2 billion for the year, also down from a previous range of $23.7 billion to $24.2 billion.
The company plans to invest in private brands, open more stores outside of malls, and grow its online business in the hopes of driving up sales.
“We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories,” Gennette also said in the company’s earnings call. He also stated, “The US consumer, particularly at Macy’s, pulled back more than we anticipated.”
Shares of the company fell nearly 6% in early trading on Thursday but bounced back in the afternoon and ended the day up 1.2%.
Dollar General Corporation (DG) also reported its first-quarter earnings report Thursday morning. The company announced earnings of $2.34 per share and revenue of $9.34 billion, coming in lower than analysts’ estimates for earnings of $2.38 per share and revenue of $9.46 billion. Revenue did rise about 7% year-over-year from revenue of $8.8 billion in the same quarter last year.
For its full-year outlook, Dollar General expects a 3.5% to 5% rise in net sales, down from the previous guidance of 5.5% to 6%. Earnings per share are expected to remain flat or reach a loss of 8% from the year before, compared to company management’s previous projection for a 4% to 6% rise.
The discount retailer is pulling back in its expansion of pOpshelf stores (where all merchandise is rounded up to whole numbers), expecting now to only open 90 stores instead of the originally projected 150. The company planned on opening a total of 1,050 new stores in fiscal year 2023 but is now only planning to open 990.
CEO Jeff Owen said in the company’s earnings release:
While the macroeconomic environment has been more challenging than expected, particularly for our core customer, we are confident in Dollar General’s ability to deliver strong growth in the years ahead, despite the near-term pressure which impacted our first quarter sales results and is anticipated to impact our full-year sales and EPS … We are controlling what we can control and have made significant progress improving our execution on multiple fronts, including on our supply chain recovery efforts and enhancements to the customer experience with our previously announced investment in incremental labor hours.
DG fell more than 20% to a new 52-week low of $159.12 following its earnings report on Thursday.
Lululemon Athletica Inc. (LULU) released its first-quarter earnings Thursday afternoon. The company reported earnings of $2.28 per share, up 54% from earnings of $1.48 per share in the same quarter last year. Revenue increased 24% year-over-year to $2 billion, up from $1.61 billion a year ago. Analysts expected earnings per share of $1.98 and revenue of $1.93 billion, so the company beat analysts’ expectations on both the top and bottom lines.
In the earnings release, Chief Financial Officer Meghan Frank said, “A meaningful acceleration in our China sales trend, coupled with lower air freight, contributed to our better-than-planned financial performance.”
Lululemon also increased its revenue and earnings outlook for the full year. The company anticipates revenue to be between $9.44 billion and $9.51 billion, up from previous guidance for revenue of $9.31 billion to $9.41 billion. It also expects full-year earnings to be between $11.74 and $11.94 per share, up from its previous range of $11.50 to $11.72 per share.
Shares of Lululemon surged more than 12% on Friday.
Where to Invest Instead
The retail sector has been hurting in the past year; the SPDR S&P Retail ETF (XRT), which tracks retail stocks, is down 2.8%, as I write.
Another sector, on the other hand, is booming: tech.
The tech-heavy NASDAQ has been outperforming the other major indices this year. As I write this, the NASDAQ is up 26%, while the S&P 500 has gained 12% and the Dow has climbed about 2%.
The NASDAQ has been getting a strong push from mega-cap and artificial intelligence (AI)-related stocks, namely Alphabet Inc. (GOOG), Microsoft Corp. (MSFT) and NVIDIA Corp. (NVDA).
However, if you’re considering tech stocks, you always want to make sure you’re invested in fundamentally superior companies that consistently grow their earnings – like the companies on my Growth Investor Buy List.
I’ve taken steps to align my Growth Investor Buy Lists to prosper in multiple corners of the market, as well as the current AI craze, by “locking and loading” my Buy Lists with stocks with accelerating earnings and sales momentum.
If you become a Growth Investor member, you’ll have access to my newest recommendations, as well as my two Buy Lists: High-Growth Investments and Elite Dividend Payers. I also include two Top Stocks lists, which are select lists of stocks from my Buy Lists that are backed by persistent institutional buying pressure and stunning fundamentals.
To join me at Growth Investor today – and gain full access to my Buy Lists – click here.
(If you are already a Growth Investor subscriber, you can log in here to view the most recent issue.)
Sincerely,
Louis Navellier
P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.
On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.
What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.
Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.
It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Alphabet Inc. (Google), Microsoft Corp. (MSFT) and NVIDIA Corp. (NVDA)
