HOUSING GAINS AND MILD WEATHER KEEP HOME DEPOT GOING STRONG

The Home Depot’s stock opened at a record-high level today, after announcing they topped first quarter expectations. Mild weather and a strong housing rebound are attributed to their successful first quarter. Revenue increased to $22.76 billion from $20.89 billion. Same store year over year sales rose 6.5% overall,up 7.4% in US stores.

Chairman and CEO Craig Menear said the company saw “week to week demand spikes caused by weather variability”. Home Depot originally forecasted 2016 earnings of $6.12 to $6.18 per share, with revenue predicted to increase 5.1-6% and same store sales to rise 3.7-4.5%. With its positive first quarter, Home Depot now predicts 2016 earnings of $6.27, sales to rise 6.3% and same store sales to rise 4.9%.

Having cited a strong housing rebound as another reason for a strong first quarter, steady growth for the housing market looks like it will continue. The National Association of Home Builders reported continued strong sentiment in May. Low mortgage rates are fueling demand that have boosted expectations for home sales in the next six months to the highest level of the year. More housing data is due out later this week, including housing starts and existing home sales.

Source: US News & World Report, Wall S. Journal

APRIL RETAIL SALES REBOUND. WILL RETAILER STOCKS RECOVER?

Wall Street analysts are calling last week “Retail Wreck” due to numerous retailers’ news of poor sales, profits and future outlook on consumer spending. April retail sales came in higher than expected with a positive 1.3% gain, the highest gain in a year. Will strong sales in the first month of the second quarter help with a stock rebound for retailers?

Last week’s poor results were reported by many retailers, including Macy’s, Kohl’s and Nordstrom’s. Department stores are also responding to the strong online sales versus in-store that was reported, with online sales soaring 10.2% over last year. They are struggling with putting inventory in the right place to meet their increasingly complicated inventory and distribution demands.

Investors are waiting for home-improvement results this week from Home Depot, Lowe’s, Target and Wal-Mart to try to determine if the profit misses in the retail space is a problem just for department stores and apparel makers, or if it is a broader problem ahead for the consumer-driven US economy.

See the Accelerated Analytics’ blog from last week, reporting on the stock decreases across several retailers and apparel manufacturers: http://www.acceleratedanalytics.com/blog/2016/5/12/retail-stock-market-was-a-bear-yesterday-dropping-to-worst-l.html and continue to monitor our blog http://www.acceleratedanalytics.com/blog/ page this week as additional retailers report on Q1 results.

Sources: The Wall Street Journal, USA Today

RETAIL STOCK MARKET WAS A BEAR YESTERDAY, DROPPING TO WORST LEVELS SINCE 2011

There were stock declines all over the retail spectrum yesterday, as consumers spend less than expected and shift spending from traditional department stores and retailers to nontraditional online retailers. The SPDR S&P Retail ETF closed down 4.44%, the worst since August 18, 2011 and down 15% over the last 12 months.

Macy’s is getting the most news of the day, closing down 15.2%. This caused CEO Terry Lundgren to lower its full-year forecast. Quarterly earnings for Macy’s exceeded expectations, but revenue came in below estimates.

April retail sales will be announced on Friday morning, and analysts are waiting to see what stock impact these results will have.

Other retailers with dropped stock levels yesterday include Wal-Mart, Home Depot, Nike, Fossil, and Disney, who dropped 4.04%, its worst day since January 15.

Source: CNBC, Wall St Journal

LOWE’S COMPANY SHARES RAISED TO OUTPERFORM

With an improvement in housing and overall economic activity in Southeastern states, Lowe’s is expected to witness accelerating sales and potentially narrow its comp store sales with Home Depot in the region. A report this week forecasts a 4% growth at Lowe’s following disappointing Q1 2015 sales of $14.1 billion versus $14.26 billion. However, Lowe’s Companies’ revenue was up 5.4% compared to Q1 2014.

Several equities research analysts issued positive reports for Lowe’s stock, setting buy ratings over $80 per share. Experts expect Lowe's to complete the year with $3.94 EPS. 

Source: The Legacy

Analysts Reduce Retailer Earnings Estimates Due To Strong US Dollar

The US dollar has increased 12% so far in 2015 against the euro and is up 27% from a year ago. This has prompted Wall Street analysts to make deep cuts to earnings forecasts of US multinational companies, and increasing the appeal of smaller, domestically focused companies.

As a result, investors are keeping a continued bias toward U.S.-based stocks that do less business abroad, such as shares of small companies that tend to be more domestically focused, and on companies outside the U.S. that stand to benefit from a weakening of their home currency as the dollar strengthens, particularly European manufacturers. Tiffany & Co. announced sales fell 1% in January but would have risen 3% if not for currency moves.

Wells Fargo looked at how 2015 consensus earnings estimates for retailers have evolved over the past two years alongside how their stocks performed. Among the 51 firms sampled, estimates fell for 42, or 82%, of them. Three companies—Shutterfly, Aeropostale and J.C. Penney—saw declines of more than 100%. Yet retailers’ stocks performed fairly well over the period. Shares only declined for 13 of the 51. On average, the share price among the sample actually increased 46%. In other words, valuation multiples expanded.

Companies that generate more than 50% of sales outside the U.S. are expected to post an earnings decline of 11.6% in the first quarter when results start rolling in next month. Companies that generate less than half of sales outside the U.S. are expected to post flat earnings for the quarter.

David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., said that when the dollar has rallied in the past, consumer-discretionary and consumer-staples stocks have fared better than the broader market. These sectors have relatively low exposure to overseas markets.

Source: The Wall Street Journal