Walmart (WMT) and Goal ( TGT ) is off to a great week for retail earnings. Others to be reported during the week include Lowe’s (LOW), TJX (TJX), Ross stores (ROST) and Walmart’s Dow Jones Home Depot (HD). The financial reports from Walmart and Target come as the big-box leaders navigate shifts in consumer spending amid rising interest rates.
X
The annual inflation rate eased in July to 8.5%, from 9.1% in June. The slowdown was largely due to lower gas prices, but federal data show that the price of food and other goods continues to rise.
Earlier, both Walmart and Target lowered second-quarter guidance to reflect economic concerns. Retail stocks fell sharply in late July after Walmart cut its profit outlook amid efforts to cut prices and clear unsold inventory from its shelves.
The move came as customers recalibrated their budgets to absorb heartbreaking levels of inflation. With consumers redirecting more spending to cover rising food prices, Walmart said it expects a tougher stretch for its general merchandise segment for the rest of the year.
best buy (A.B.Y.), dollar tree (DLTR) and Dollar General ( DG ) were among the other retail stocks that fell on Walmart’s outlook.
estimates: Analysts forecast a 9% drop in Walmart’s earnings, to $1.62 per share, in the quarter. Analysts’ revenue target is $150.9 billion, up 7%.
results: Back on Tuesday morning.
Shares of Walmart rose 0.4% to 132.77 in premarket trading on Monday. According to MarketSmith analysis, the stock is back above support at its 10-week moving average as it tries to break out of a four-month consolidation.
In its July 25 earnings warning, Walmart said it expects full-year adjusted earnings per share to fall between 11% and 13%, compared with a May forecast of a decline of ‘about 1%. Analysts were expecting annual earnings of 5.69 per share, down 11.9%.
For the second quarter, the big-box retailer expects an 8% to 9% decline in earnings per share. In May, Walmart said it expected earnings to be “flat to slightly.” May earnings per share forecasts were already downgraded from an outlook offered in February.
Is Walmart a buy or a sell right now?
Walmart also said it expects second-quarter net sales growth of 7.5%. That was better than May’s forecast of a “more than 5%” increase.
“Rising levels of food and fuel inflation are affecting the way customers spend, and while we’ve made good progress in hard-line categories, apparel at Walmart USA requires more markdown dollars,” he said. CEO Doug McMillon said in a statement.
Walmart stock has a composite score of 49 out of 99. It has a relative strength score of 34, an exclusive IBD Stock Check indicator of share price movement on a scale of 1 out of 99. The rating shows how a stock’s performance over the past 52 weeks holds up against all other stocks in the IBD database. The EPS rating of the stock is 69.
estimates: Wall Street expects Target to earn 79 cents per share on $26 billion in sales.
results: Check Wednesday before the market opens.
Target shares rose 0.4% to 173.13 early Monday. The target stock has eased above 10-week support with a four-month consolidation.
In early June, Target lowered its second-quarter guidance. The Minneapolis-based company cut its second-quarter operating margin forecast to 2% from 5.3%.
The company also announced that it plans to raise prices to address “unusually high transportation and fuel costs.” In addition, Target also reported its intention to eliminate excess inventory and cancel orders before the end of the second quarter.
“While these decisions will result in additional costs in the second quarter, we are confident that this quick response will pay off for our business and our shareholders over time, leading to improved profitability in the second half of the year and beyond,” said CEO Brian. Cornell said at the time.
Target made the decisions after missing earnings estimates, driving down profits and reporting large inventories of unsold goods in the first quarter. Those results sent Target shares to their lowest level since September 2020.
Target ranks third, behind Walmart and costco (COST), in the Retail-Major Discount Chains industry group. The stock has a Composite Score of 48. Its Relative Strength Score is 13 and its EPS Score is 82.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
YOU MIGHT LIKE IT TOO
What is CAN SLIM? If you want to find winning stocks, know better
The best funds buy into the #1 sector leader near a breakout with 364% growth.
Trade with experts on IBD Live
Get an edge in the stock market with IBD Digital
Rally to key test; 5 actions near the points of purchase
Last weekend, I wrote about Warren Mosler's argument that the Fed's rate hikes could be…
Last weekend, I he wrote on Warren Mosler's argument that the Fed's rate hikes could…
Last week, the chairman of the Fed, Jerome Powell said, "the disinflationary process has begun".…
Earlier this week, I joined Romaine Bostick and Scarlet Fu Bloomberg TV. The Congressional Budget…
Tomorrow morning, I'll be joining CNBC's Squawk Box to talk about a new effort tax…
Former Vice President Mike Pence talks about privatizing Social Security. The remarks came Thursday before…