Market Update
Asian Markets Tumble Following U.S. Rout
Arjun Pandit
19 May, 2022
New York
Asian markets declined after the key index in the U.S. dropped more than 4%, the largest decline since June 2020.
The fears of rising inflation hitting the corporate earnings and the lagging response from the Federal Reserve Bank added to market anxieties.
Investors are worried on the one hand that the higher interest rates may slow down the economy but on the other hand if rates are not raised fast enough then inflation will get entrenched and eat into corporate earnings.
These conflicting views have been feeding market uncertainty for the last eight weeks.
Global market selloff sparked by the U.S. decline after two leading retailers Walmart and Target reported sharply lower earnings and highlighted rising operating costs.
The earnings results and other economic indicators have been signaling that inflation is entrenching post-pandemic and slowing the economic activities.
In Tokyo, the Nikkei index declined 1.9% to 26,402.82.
Tech and automakers led the decline in Tokyo and SoftBank Group fell 1.6% to 5,055.00 yen and Recruit Holdings Co fell 4.2% to 4,602.00 yen.
Japan's trade deficit in April rose to 839.2 billion yen (about $7 billion) from the upwardly revised 414.1 billion in March.
Exports increased 12.5% to 8.076 trillion yen or $63 billion and imports increased 28.2% to 8.915 trillion yen or $70 billion, the Ministry of Finance reported today.
Imports were the largest since record keeping began in 1979.
Japan recorded a monthly deficit for the ninth month in a row and swung from a surplus of 227 billion in April 2021.
Core machine orders rose 7.6% in March to 869.5 billion yen, the Cabinet Office reported today.
In Hong Kong the Hang Seng Index fell 2.5% to 20,120.68, the largest decline since May 6. Hang Seng Tech index fell 4% but the Shanghai Composite Index gained 0.4%, the only gainer in Asian markets.
Ten Cents plunged 6.5% after the operator of Chinese super app WeChat reported flat revenues in the first quarter and a 51% plunge in net income.
The weak results reflected the fallout from the resurgent Covid-19 virus, the impact of the year-long regulatory crackdown on tech companies, and the headwind from the macro economy.
The weak results from Ten Cents dragged down other tech stocks.
Alibaba Group Holdings fell 7.3%, NetEase declined 2.5%, and Meituan dropped more than 3.7%.
In economic news, Hong Kong unemployment rate increased to 5.4% in three months to April from 5.0% in the previous three months.
Under employment increased to 3.8% in three months to April from 3.1% in the previous three months to March.
In Seoul, the Kospi index declined 1.3% to 2,592.34.
In Sydney, the ASX 200 index fell 1.7% to 7,064.50 after retailers plunged. Wesfarmers dropped 8% to an 18-month low, Coles declined 5%, and furniture retailer Norman declined 5.5%.
The Sensex index declined 2.6% or 1,416.30 to 52,792.23 and the Nifty index fell 2.65% or 430.95 to 15,809.32.
Tech stocks dropped between 5% and 7% following the decline in the U.S.
Tata Consultancy Services dropped 5% to 3,271.90 rupees, Infosys declined 5.2% to 1,431.03 rupees , Tech Mahindra fell 5.03% to 1,113.04 rupees, and HCL Tech plunged 5.8% to 1,011.40 rupees.
Metal and materials stocks also declined more than 4%.
Hindalco fell 4.4% to 417.20 rupees, Tata Steel declined 4.3% to 1,128.95 rupees, and JSW Holdings fell 3.2% to 3,465.05 rupees.
Cisco Reports Flat Quarterly Sales, Guides Q4 Sales to Fall
Scott Peters
18 May, 2022
New York
Cisco Systems Inc reported sales in the fiscal year third quarter ending in April sales were flat $12.8 billion compared to a year ago and net income increased 6% to $3 billion.
Diluted earnings per share in the quarter increased 7% to 73 cents from a year ago.
Revenues in the Americas rose 5%, Europe and Middle East decreased 6%, and Asia Pacific including China and Japan fell 6%.
Sales were also impacted by one less week in the quarter which resulted in 3% of revenues increase a year ago.
In March, the company also announced suspension of its business in Russia and Belarus which generated revenues of $200 million.
The company also said the product backlog exceeds $15 billion.
Total gross margin declined to 63.3% from 63.9% in the prior year's quarter and operating margin in the quarter was 28.1%.
Deferred revenues increased 7% to $22.3 billion with deferred product revenues up 13% and deferred service revenues up 2%.
In the third quarter of fiscal 2022, the company returned $1.8 billion to stockholders through share buybacks and dividends.
The declared and paid a cash dividend of $0.38 per common share, or $1.6 billion, and repurchased approximately 5 million shares of common stock under our stock repurchase program at an average price of $54.20 per share for an aggregate purchase price of $252 million.
The stock repurchase program has still available $17.6 billion with no termination date.
Guidance & Outlook
The network systems maker guided fiscal fourth quarter revenues to decline between 1% and 5% from a year ago and earnings per share between 60 cents and 70 cents.
In the full fiscal year 2022, revenues are expected to rise between 2% and 3% and GAAP earnings per share between $2.75 and $2.85.
The guidance reflects 52 weeks in fiscal year 2022 compared to 53 weeks in fiscal 2021.
Company and Stock
Cisco Systems is headquartered in San Jose, California and employs about 80,000 people around the world.
Cisco stock dropped 13% in after-market trading after the earnings release and prior to the release has declined 23.4% in the year-so-far at the close of regular trading hours.
Broad Selloff Sinks S&P 500 and Nasdaq 4% Deeper
Barry Adams
18 May, 2022
New York
U.S. stocks fell at the opening and gradually declined and sank to lower lows as the session progressed.
Investors turned cautions after four large retailers Walmart, Target, Lowe's and Home Depot reported weak quarterly results and highlighted inflation and wage pressures, rising freight costs and challenges in managing inventories.
TJX, the operator of TJ Maxx, Marshalls and HomeGoods, reported sharply higher sales and earnings, bucking the trend.
The S&P 500 index declined 4.04% to 3,923.68 and the Nasdaq Composite index fell 4.7% to 11,.418.15.
The indexes closed down after four days of gains.
The Nasdaq Composite sank deeper into bear territory with a year-to-date loss of 27.9% and the S&P 500 index extended losses in the year to 18.2%.
Investors focused on how companies are handling inventories and supply chain problems and were also looking for clues how the consumer is reacting to higher prices at stores and at gas stations.
Walmart said many of its price sensitive customers are switching to store brands and buying fewer items and making fewer trips to stores.
Home Depot also reported fewer transactions but a small increase in average ticket size.
Unusually cold weather also impacted sales of pool supplies, lawn chemicals and other seasonal items forcing retailers to increase markdowns.
However, Target added the consumer is healthy and spending more on items that are linked to experiences such as birthday parties and travel but avoiding high margin discretionary items.
The indexes have been on the defensive for the last seven weeks as rising fuel and food prices are leaving customers with less money to pay for discretionary items.
Target's weak earnings follows Walmart's earnings on Tuesday after the largest retailer lowered expectations for the rest of the year.
On the back of weak results from four leading retailers, stocks in the sector fell and brought down wider indexes as well.
Market is increasingly worried that there is more pain in the economy and the company's valuations are still not reflecting lower future streams of earnings, higher interest rates, slowing down economic conditions.
Dollar General declined 11%, Dollar Tree fell 14%, Five Below plunged 11.4%, Kohl's Corp fell 10.9%, and Macy's decreased 10.6%.
Crude oil fell 3.2% to $109.51 after rising as much as 0.5%.
The yield on 10-year U.S. Treasury notes edged down but traded near 2.877%.
Weekly mortgage applications declined 12% at the end of last week from the previous week and fell 15% from a year ago according to Mortgage Bankers Association.
Separately, home builders association reported the confidence index declined 8 points to 69 in May, a fifth monthly decline in a row and lowest since June 2020.
The single family starts in April declined 7.3% to 1.1 million units annual rate adjusted for seasonal factors, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The multifamily sector, which includes apartment buildings and condos, increased 15.3% to an annualized 624,000 rate.
European markets turned negative on the growing worries of rising inflation and lagging central bank's response.
The U.K. inflation accelerated to 9% in April from 7% in March driven by rising food and fuel prices, the Office of National Statistics said today.
The 40-year high inflation is likely to peak in October around 10% before it declines.
Moreover, new car registration in the European Union declined for the fourth month in a row in April. the European Automobile Manufacturers' Association said today.
The DAX index declined 1.3% to 14,007.76, the CAC-40 index dropped 1.2% to 6,352.94, and the FTSE 100 index fell 1.07% to 7,438.09.
Asian markets closed mixed after Japan reported GDP and industrial production data.
Japan's GDP in the first quarter contracted at 1% annualized rate, the Cabinet Office said today. The preliminary data showed that the economy rose at 0.2% rate after adjusting for seasonality factors.
The decline was less than the 1.8% fall estimated by many economists. The GDP growth data for the previous quarter was lowered to 3.8% increase from the 5.4% rise in the preliminary estimate.
The weakness in international trade dragged the economic activities lower.
Industrial production in March rose 0.3% after adjusting for seasonal factors, the report from the Ministry of Economy, Trade and Industry noted today.
In Tokyo, the Nikkei index increased 251.45 or 0.94% to close at 26,911.20.
Market indexes in Australia rose nearly 1% but in India and South Korea eased and in Hong Kong edged higher.
European Markets Drop 1%, Car Registrations Drop for the 4th Month
Barry Adams
18 May, 2022
New York
European markets turned negative on the growing worries of rising inflation and lagging central bank's response.
The U.K. inflation accelerated to 9% in April from 7% in March driven by rising food and fuel prices, the Office of National Statistics said today.
The 40-year high inflation is likely to peak in October around 10% before it declines.
Moreover, new car registration in the European Union declined for the fourth month in a row in April. the European Automobile Manufacturers' Association said today.
New Passenger vehicle registration fell 20.6% in April after falling 20.5% in March.
The April month data was the weakest since record keeping began except the pandemic year 2020. About 684,506 passenger vehicles were registered in April compared to 862,443 registrations a year ago.
From January to April of 2022, new car registrations declined 14.4% across the EU, totaling 2,930,366 units.
Supply disruptions and chip shortages weighed heavily on manufacturers.
The DAX index declined 1.3% to 14,007.76, the CAC-40 index dropped 1.2% to 6,352.94, and the FTSE 100 index fell 1.07% to 7,438.09.
Lowe's Sales Fall On Colder Weather and Financially Strapped Consumer
Scott Peters
18 May, 2022
New York
Lowe's Companies, Inc reported first quarter ending in April 2022 sales decreased 3.2% to $23.66 billion and flat net income of $2.33 billion.
Diluted earnings per share in the quarter rose to $3.51 from $3.21 a year ago.
The retailer also increased dividend per share to 80 cents from 60 cents a year ago.
Unusually cold weather in the quarter impacted sales of outdoor seasonal categories.
Operating margin in the quarter rose 65 basis points to 13.96 and the company is looking to improve more in the current year.
Consolidated comparable sales declined 4% in the quarter and fell 3.8% at the U.S. stores.
Comparable sales rose 19.7% on a two-year basis.
About 75% of Lowe's customers are working on remodeling or DIY projects and are sensitive to recent fuel price increases and consumers are replacing their fuel inefficient lawn mowers and laundry machines to battery powered machines.
Guidance & Outlook
The home improvement retailer expects full-year 2022 revenues between $97 billion and $99 billion on a 53-week year basis compared to the 52-week year in 2021.
The company also estimated between $1.0 billion and $1.5 billion in revenues in the 53rd week.
Comparable sales are expected to range between 1% rise and fall and operating margin is expected to be between 12.8% and 13%.
Diluted earnings in the year are expected to be between $13.10 and $13.60.
The company also plans to repurchase total shares of approximately $12 billion.
Company & Stock
As of April 29, 2022, Lowe’s operated 1,971 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space, and it serviced approximately 230 dealer-owned stores.
Lowe's stock declined 6.2% to $181.62 after reporting earnings and has fallen 29% year to date so far.
Target Earnings Plunge 50% On Cost Pressures and Supply Disruptions
Scott Peters
18 May, 2022
New York
Target Corp said sales in the fiscal first quarter ending in April increased 4% from a year ago to $24.8 billion and net income declined 52% to $1.0 billion.
Diluted earnings per share in the quarter fell 48% to $2.16 from $4.17 a year ago.
Comparable sales including sales and e-commerce in the quarter rose 3.3% after rising 22.9% a year ago and traffic in the quarter rose 3.9%.
Comparable store sales increased 3.4% in the quarter after rising 18% last year.
Digital comparable sales growth slowed to 3% after surging 50% in the period a year ago.
Consumers focused on basic household items, food and beverages, and beauty essential needs as inflation and rising gas prices limited budgets for discretionary items.
Operating income plunged 43.3% from a year ago to $1.3 billion largely on a lower gross margin rate.
Supply chain disruptions led to some products arriving too late and others reaching warehouses too early forcing the company to larger than usual markdowns.
Operating income margin in the quarter fell to 5.3% from 9.8% in the period a year ago.
Higher freight rates also added to the inventory schedule havoc caused by supply chain disruptions.
Guidance & Outlook
For the second quarter, the retailer expected operating margin rate to fluctuate in a wide range centered around the first quarter's rate of 5.3% and around 6% for the full-year.
Full-year 2022 sales are expected to increase in low- to mid-single digits.
Company & Stock
Target Corp is headquartered in Minneapolis, Minnesota and operates 1,931 stores and employs 400,000 people.
Target stock plunged 27.7% to $155.53 after the company released earnings today and for the year declined 32.8%.
Movers: Target, Lowe's, TJX, Deckers, Children's Place, Ross Stores
Barry Adams
18 May, 2022
New York
Retail stocks plunged after Target reported weak results and Lowe's sales were below expectations.
Dollar Tree declined 17%, Dollar General fell 12.3%, Five Below declined 7.5%, Costco Wholesale Corp dropped 11.6%, Macy's edged down 5%, and Best Buy, Ulta Beauty, Autozone, and Advance Auto Parts dropped 8%.
Lowe's Companies declined 4% to $186.22 after the home improvement retailer reported fiscal first quarter ending in April net sales declined to $23.66 billion from $24.42 billion a year ago.
The retailer reiterated its full-year sales outlook between $97 billion and $99 billion and same store sales to range between a decline of 1% and an increase of 1%.
Target Cop plunged 24% to $163.31 after the retailer reported weaker than expected earnings on rising inventory problems, higher market downs, and wage pressures.
GAAP earnings per share in the first quarter declined 48% to $2.16 from $4.17 after sales increased 4% to $24.83 billion from a year ago.
Net earnings in the quarter fell 52% to $1.0 billion from $2.1 billion a year ago.
First quarter operating income margin rate was 5.3% compared to 9.8% in 2021 and gross margin rate was 25.7% declined from 30.0 percent in 2021.
"This year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in our distribution centers." the retailer noted in a press release.
TJX Companies soared 8.5% to $60.95 after the apparel and home goods retailer reported net sales in the first quarter ending in April increased 13% to $11.4 billion and net income rose 10% to $587 million.
Total inventories rose 42% to $7.0 billion and said in the earnings release overall availability of quality, branded merchandise in the marketplace remains excellent" for the summer season.
Ross Stores jumped 1.2% on the back of TJX earnings and inventory comments and ahead of earnings tomorrow after the close of market.
Children's Place declined 10.5% to $43.20 ahead of the earnings release and conference call tomorrow morning at 8:00 a.m. ET.
Deckers Outdoor Corp declined 7.6% to $225.65 ahead of the earnings call tomorrow after the close of market.
U.S. Indexes Fall After Target Earnings Highlight Retail Sector Struggle
Barry Adams
18 May, 2022
New York
U.S. stocks fell after Target reported sharply lower quarterly results stoking fears of wider economic malaise.
The S&P 500 index declined 1.5% to 4,026.76 and the Nasdaq Composite index fell 1.8% to 11,770.48.
The indexes are likely to close down for the first time in four days.
Target Corp, a major retailer of food, groceries, and general merchandise, said higher freight costs and wages compounded supply disruptions in the quarter.
However, the retailer added the consumer is healthy and spending more on items that are linked to experiences such as birthday parties and travel.
The indexes have been on the defensive for the last seven weeks as rising fuel and food prices are leaving customers with less money to pay for discretionary items.
Target's weak earnings follows Walmart's earnings on Tuesday after the largest retailer lowered expectations for the rest of the year.
On the back of weak results from two leading retailers, stocks in the sector fell.
Dollar General declined 12%, Dollar Tree fell 15%, Five Below plunged 8.4%, Kohl's Corp fell 8.4%, and Macy's fell 7.5%.
Crude oil edged higher 56 cent to $112.91 on the expectations that China demand will resume in the next month.
The yield on 10-year U.S. Treasury notes edged down but traded near 2.95%.
Weekly mortgage applications declined 12% at the end of last week from the previous week and fell 15% from a year ago according to Mortgage Bankers Association.
Separately, home builders association reported the confidence index declined 8 points to 69 in May, a fifth monthly decline in a row and lowest since June 2020.
The single family starts in April declined 7.3% to 1.1 million units annual rate adjusted for seasonality factors, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The multifamily sector, which includes apartment buildings and condos, increased 15.3% to an annualized 624,000 rate.
European markets turned negative on the growing worries of rising inflation and lagging central bank's response.
The U.K. inflation accelerated to 9% in April from 7% in March driven by rising food and fuel prices, the Office of National Statistics said today.
The 40-year high inflation is likely to peak in October around 10% before it declines.
Moreover, new car registration in the European Union declined for the fourth month in a row in April. the European Automobile Manufacturers' Association said today.
New Passenger vehicle registration fell 20.6% in April after falling 20.5% in March.
The April month data was the weakest since record keeping began except the pandemic year 2020. About 684,506 passenger vehicles were registered in April compared to 862,443 registrations a year ago.
From January to April of 2022, new car registrations declined 14.4% across the EU, totaling 2,930,366 units.
Supply disruptions and chip shortages weighed heavily on manufacturers.
The DAX index declined 0.9% to 14,061.23, the CAC-40 index dropped 1% to 6,367.77, and the FTSE 100 index fell 0.4% to 7,485.98.
Asian markets closed mixed after Japan reported GDP and industrial production data.
Japan's GDP in the first quarter contracted at 1% annualized rate, the Cabinet Office said today. The preliminary data showed that the economy rose at 0.2% rate after adjusting for seasonality factors.
The decline was less than the 1.8% fall estimated by many economists. The GDP growth data for the previous quarter was lowered to 3.8% increase from the 5.4% rise in the preliminary estimate.
The weakness in international trade dragged the economic activities lower.
Industrial production in March rose 0.3% after adjusting for seasonal factors, the report from the Ministry of Economy, Trade and Industry noted today.
In Tokyo, the Nikkei index increased 251.45 or 0.94% to close at 26,911.20.
Asian Markets Closed Mixed, Japan's GDP Shrank
Barry Adams
18 May, 2022
New York
Asian markets closed mixed after Japan reported GDP and industrial production data.
Japan's GDP in the first quarter contracted at 1% annualized rate, the Cabinet Office said today.
The preliminary data showed that the economy rose at 0.2% rate after adjusting for seasonality factors.
The decline was less than the 1.8% fall estimated by many economists. The GDP growth data for the previous quarter was lowered to 3.8% increase from the 5.4% rise in the preliminary estimate.
The weakness in international trade dragged the economic activities lower.
Industrial production in March rose 0.3% after adjusting for seasonal factors, the report from the Ministry of Economy, Trade and Industry noted today.
In Tokyo, the Nikkei index increased 251.45 or 0.94% to close at 26,911.20.
IHI Corp led the gainers with a surge of 5% followed by 4% rise in JSW, Kobe Steel, NTT Data, and Fujitsu.
In Mumbai, the Sensex index declined 0.2% or 194.04 to 54,208.53 and the Nifty index decreased 0.12% or 19.0 to 16,240.30.
Stocks closed down after a 2-day rally and investors focused on rising food and energy prices.
In Hong Kong, the Hang Seng Index rose 0.2% to 20,644.28 and the SSE index in Shanghai declined 0.3% to 3,085.98.
In Seoul, the Kospi index gained a fraction to close at 2,625.98 in lackluster trading with a negative trading bias in tech and retail stocks.
In Sydney, ASX 200 index gained nearly 1% to 7,182.50 after resource and bank stocks led the advance.
South32 surged 5% and BHP Group gained 3%.
Champion Iron jumped 5% after the company agreed to acquire Quebec, Canada based iron ore palletizing facility from a steelmaker.
Tech Surge Powers U.S. Stocks Rally, Oil Drops 2%
Barry Adams
17 May, 2022
New York
U.S. stocks recoiled higher on Tuesday after bargain hunters searched for stocks in tech and energy sectors.
The S&P 500 index increased 2.03% to 4,088.85 and the Nasdaq Composite index surged 2.76% to 11,984.52.
The stocks rebounded after weeks of losses and the teach-heavy Nasdaq index deep in bear territory. For the year, the S&P 500 index is still down 15% and the Nasdaq is down 25% after dropping as much as 28% two weeks ago.
Airlines traded higher after United revised higher its second quarter outlook and said more passengers are flying and paying more than previously estimated.
United Airlines jumped 7.8% to $46.95, Delta Air gained 6.5% to $40.68, and Southwest Airlines increased 4.4% to $45.06. American Airlines Group jumped 7.7% to $17.83.
Futures of crude oil declined 2% to $111.97 a barrel and the yield on 10-year U.S. Treasury notes edged higher to 2.988%.
Citigroup and Paramount Global gained after Warren Buffet controlled Berkshire Hathaway reported stakes in the companies.
On the economic front, the advance estimate of retail and food services sales adjusted for seasonal factors but not adjusted for price increased 0.9% in April from the previous month and jumped 8.2% from April 2021.
The data released by the U.S. Census Bureau showed grocery store sales declined 0.1% in April from the previous month but rose 8.1% from a year ago.
However the latest earnings from Home Depot and Walmart presented two contrasting snapshots of the economy.
Walmart sales struggled reflecting the struggles of its customer base and the retail giant also suffered from supply chain disruptions and customer shifting to basic food purchases and trimming down on the higher margin apparel and electronics.
Walmart declined 11.4% to $131.35.
Home Depot reported stronger sales in the later quarter and lifted outlook for the full-year but also reported a decline in number of transactions.
Home Depot Inc rose 1.7% to $300.95.
Investors also noted recent comments from the Federal Chairman Jerome Powell during a Wall Street Journal conference.
Powell stressed that the central bank is committed to fighting inflation and ready to act to bring the "financial conditions are in appropriate place, we see inflation coming down."
European markets traded higher after bargain hunters revved up buying in large and mid cap stocks.
The DAX index gained 1.5% to 14,185.12, the CAC-40 index advanced 1.3% to 6,430.19, and the FTSE 100 index gained 0.7% to 7,518.36.
Investors cheered the latest jobs reports from France and the U.K.
French unemployment rate in the first quarter declined to 7.3%, the lowest in 14 years and the U.K. jobless rate fell to 3.7% in the period, the lowest since 1974.
Eurozone growth in the first quarter increased 0.3% from the previous quarter matching rate in the fourth quarter, according to the data released by the Eurostat.
Asian markets advanced after China authorities suggested Covid-19 restrictions may be eased as early as June.
The Nikkei 225 index in Tokyo increased 0.4% to 26,695.75, the Hang Seng Index in Hong Kong advanced 3.3% to 20,602.52, and the ASX 200 index in Sydney added 0.3% to 7,112.50.
The Sensex index gained 2.54% or 1,344.63 to 54,318 and the Nifty index advanced 2.6% or 417.00 to 16,259.50.
Walmart Lowers Expectations, Sam's Club Comparable Sales Accelerate
Scott Peters
17 May, 2022
New York
Walmart Inc reported sales in the first quarter fiscal year 2023 ending in April increased 2.4% to $141.6 billion and net income declined 25% to $2.1 billion.
Diluted earnings per share declined 23.7% to 74 cents from 97 cents a year ago.
Sales rose 2.6% on a constant currency basis.
Walmart U.S. sales increased 4% to $96.9 billion and comparable sales increase declined to 3% after rising at 6% in the previous year's period.
Walmart U.S. comparable store sales increased 3% from a year ago and rose 9% on a two-year basis and e-commerce sales rose 1% and 38% respectively.
Average ticket sales declined to 3% from 6% increase in the prior year's quarter but the number of transactions were flat in the quarter compared to 3.2% decline in the prior year's period.
Also consumers bought fewer items at the time of purchase.
The retail chain executives in a conference call after the earnings release said customers are prioritizing food over other items as rising inflation dent consumer budgets.
Rising fuel and food prices created "more pressure on margin mix and operating costs," said CEO Doug McMillion.
Also inventories surged nearly 33% after the retailer ordered more items to beat the inflation but some supplies arrived late and also cool weather affected sales of landscaping and pool products.
The tone of executives in the call was less comforting than during the previous quarter's call.
On the conference call, Walmart noted consumers are more likely to trade down on meat and dairy purchases after the recent surge in prices.
Grocery sales in the quarter at the U.S. locations rose in low double-digits and general merchandise sales declined in low double-digits.
Operating income at the U.S. locations plunged 18.2% to $4.5 billion from a year ago.
Sales at international locations declined 13% to $23.8 billion and fell 11.6% to $24.1 billion. Operating income fell 35.3% or 33.7% in constant currency to $0.8 billion.
Net sales at stores located in China increased 7.2% on 4.4% comparable sales rise, in Mexico rose 10.4% on 9.2% comparable sales increase, and in Canada jumped 6.9% on 7.7% comparable sales growth.
Sam's Club, the discount membership warehouse, sales increased 17.5% to $19.6 billion and comparable sales increased 10.2% from a year ago and jumped 17.4% on a two-year basis.
Gross margin declined to 2.2% due to higher discounting caused by inventory delays and higher supply chain costs.
Membership revenues increased 10.5% and number of transactions increased 102%.
Comparable sales growth picked up to 10.2% from 7.2% in the quarter a year ago.
The company declared a dividend of $2.40 a share, lower than $2.20 in the previous quarter.
Long term debt has been on the decline and dropped to $32.1 billion from $34.8 billion at the end of the previous quarter and from $40.3 billion at the end of the quarter a year ago.
The company paid out $4 billion to shareholders through $1.5 billion in dividends and $2.4 billion of stock repurchase.
Guidance and Outlook
The retail chain lifted consolidated sales outlook for the fiscal year 2023 to an increase of 4% in constant currency from the previous estimate of 3%.
Comparable sales at the U.S. locations are now estimated to increase 3.5% form the previous estimate of 3%.
Earnings per share are now estimated to decline 1% from the previous estimate of an increase in mid-single digits.
In the second quarter, sales are expected to rise 5% and comparable sales at U.S. locations excluding fuel are expected to increase between 4% and 5%.
Earnings per share in the quarter are expected to increase "flat to slightly" from the previous estimate of an increase in low to single-mid digits.
Company and Stock
Walmart Inc generated $573 billion in sales in fiscal year 2022, operates 10,500 retail stores and e-commerce platforms in 24 countries, and employs 2.3 million associates worldwide.
Walmart stock declined 11.4% to $131.20 after the release of earnings and has declined 9.3% in the year so far.
Home Depot Lifts Annual Outlook, Transaction Size Jumps 11%
Scott Peters
17 May, 2022
New York
Home Depot Inc said first quarter sales increased 3.8% to $38.9 billion and net income rose 2.1% to $4.2 billion from a year ago.
Diluted earnings per share increased 6.2% to $4.11 from $3.87 a year ago.
Customer transactions in the quarter declined 8.2% to 410.7 million and average transaction size increased 11.4% to $91.72. Sales per retail square foot increased 2.7% to $621.99.
Comparable sales in the first quarter increased 2.1% and at the U.S. locations rose 1.7%.
Guidance and Outlook
The company revised annual sales and comparable sales growth to 3% from the previous estimate of "slightly positive," operating margin of 15.4% compared to flat in the previous guidance of 13.8%, net interest expense of $1.6 billion from $1.5 billion in the previous estimate, and tax rate of 24.6% matching the previous outlook.
Diluted earnings per share are expected to increase in mid-single digits from the previous estimate of an increase in low-single digits.
Company and Stock
At the end of the first quarter, Home Depot operated a total of 2,316 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
Home Depot employs approximately 500,000 associates.
Home Depot stock increased 0.5% to $297.36 and for the year so far the stock has declined 27.21%.
The company has paid a dividend for the 140th quarter in a row and increased the dividend 15% at the end of the December quarter to $1.90 a share equating to $7.90 for the full-year.
Movers: Citigroup, Fluor, Home Depot, Take Two Interactive, United Air, Walmart
Barry Adams
17 May, 2022
New York
Citigroup increased 6.6% to $50.63 after Warren Buffett controlled Berkshire Hathaway in a regulatory filing revealed a stake of $3 billion in the bank.
Wells Fargo, JPMorgan, PNC Financial Services gained more than 2%.
Berkshire Hathaway Chairman Buffett criticized investment bankers for turning the stock market into a casino during the latest and previous annual general meeting of shareholders but at the same time continues to invest in banks and investment brokerage companies.
Fluor Corp fell 4.8% to $25.84 after the government agency canceled its 10-year contract to manage nuclear weapons production sites.
The National Nuclear Security Administration canceled a 10-year $28 billion controversial contract to take "voluntary corrective action" and to assess the alleged conflict of interests.
The Department of Energy's agency awarded the contract in November 2021 and terminated the management and operations contract of Y-12 National Security Complex in Tennessee and Pantex Plant in Texas.
Bechtel and BWXT led teams filed complaints with the Government Accountability Office and alleged conflicts of interests and appearance of bidding process improprieties.
Home Depot gained 0.2% to $296.71 after the home improvement retailer reported first quarter revenues increased 3.8% to $39 billion and net income rose slightly to $4.2 billion from $4.1 billion a year ago.
Comparable same store sales at the U.S. locations increased 1.7%.
The retailer lifted annual sales growth outlook to 3% and diluted earnings per share to increase in "mid-single digits."
Take Two Interactive advanced 9.2% to $120.99 after the company reported fiscal fourth quarter revenues increased 4% to $3.5 billion and net income dropped nearly 50% to $110.1 million.
The online revenues or digital bookings increased 9% from a year ago to $833.3 million.
United Airlines Holdings increased 5.9% to $46.09 after the company in a regulatory filing said "the demand environment has continued to improve, resulting in a higher unit revenue outlook for the second quarter 2022. The price of oil has also continued to increase, resulting in a higher expected fuel price for the second quarter 2022."
The airline said average cost of fuel per gallon is now expected at $4.03 from the previous estimate of $3.43 a gallon in the second quarter.
Total available revenues per seat mile is expected to increase between 23% and 25% from the previous estimate of 17% compared to 2019.
Walmart Inc declined 8.2% to $136.15 after the retail giant said first quarter revenues increased 2.4% from a year ago to $141.6 billion and net income declined 24.8% to $2.1 billion.
The retailer also guided full-year fiscal year earnings per share to decline 1% compared to previous guidance of an increase in mid-single digits and in the second quarter increase "flat to slightly" from the previous estimate of increase in "low to single digits."
U.S. Indexes Soar After Three Days of Lackluster Trading
Barry Adams
17 May, 2022
New York
U.S. stocks advance after three days of stable prices and the rising prospects of easing restrictions in Shanghai.
The S&P 500 index increased 1.5% to 4,068.33 and the Nasdaq Composite index soared 2.08% to 11,905. 57.
U.S. stocks jumped after three days of lackluster trading and traders looked for bargains in tech stocks.
Federal Reserve Chairman Jerome Powell is scheduled to deliver his comments on the central bank's plan to tackle rising inflation at a Wall Street Journal conference at 2 p.m. ET.
The advance estimate of retail and food services sales adjusted for seasonal factors but not adjusted for price increased 0.9% in April from the previous month and jumped 8.2% from April 2021.
Retail and food services sales in April were $677.7 billion.
The March retail sales were revised higher to 0.7% from the previous month and 1.4% from a year ago.
April retail trade sales increased 0.7% from March and increased 6.7% from a year ago. Gasoline sales jumped 36.9% from a year ago and food services and drinking places sales increased 19.8% from a year ago.
Walmart Stores reported weaker than expected quarterly results and lowered outlook for the year.
Home Depot jumped 5% after the home improvement retailer reported strong quarterly sales and earnings and the company lifted 2022 annual sales outlook to 3% increase and lifted earnings growth in the mid-single digits.
Bank stocks advance after Warren Buffett controlled Berkshire Hathaway increased its stake in Citigroup by $3 billion.
Other banks including JPMorgan Chase, and Wells Fargo traded higher on the Buffett's investment.
European markets traded higher after bargain hunters revved up buying in large and mid cap stocks.
The DAX index gained 1.6% to 14,191.32, the CAC-40 index advanced 1.3% to 6,432.77, and the FTSE 100 index gained 0.8% to 7,526.46.
Investors cheered the latest jobs reports from France and the U.K.
French unemployment rate in the first quarter declined to 7.3%, the lowest in 14 years and the U.K. jobless rate fell to 3.7% in the period, the lowest since 1974.
Eurozone growth in the first quarter increased 0.3% from the previous quarter matching rate in the fourth quarter, according to the data released by the Eurostat.
Asian markets advanced after China authorities suggested Covid-19 restrictions may be eased as early as June.
The Nikkei 225 index in Tokyo increased 0.4% to 26,695.75, the Hang Seng Index in Hong Kong advanced 3.3% to 20,602.52, and the ASX 200 index in Sydney added 0.3% to 7,112.50.
The Sensex index gained 2.54% or 1,344.63 to 54,318 and the Nifty index advanced 2.6% or 417.00 to 16,259.50.
Shanghai hit the zero Covid-19 transmission for three days in a row raising the prospect of gradual lockdown easing as early as June, according to local reports quoting local authorities.
The Nikkei index advanced for the third day in a row but gains were muted on the lingering worries of Fed rate uncertainties and elevated worldwide food and energy prices.
Inpex gained 3.5% and Japan Petroleum advanced 3.6%.
Asahi Holdings declined 11% and Dentsu fell 6% on weaker than expected financial results.
Tech stocks in Hong Kong led the surge. Alibaba Group soared 7.03% to HK$90.55, Tencent Holdings jumped 5% to HK$368.40, and JD.com added 7.04% to HK$214.80.
April Retail Sales Extend 2022 Advance
Brian Turner
17 May, 2022
New York
The advance estimate of retail and food services sales adjusted for seasonal factors but not adjusted for price increased 0.9% in April from the previous month and jumped 8.2% from April 2021.
Retail and food services sales in April were $677.7 billion.
The March retail sales were revised higher to 0.7% from the previous month and to 1.4% from a year ago.
April retail trade sales increased 0.7% from March and increased 6.7% from a year ago.
Gasoline sales jumped 36.9% from a year ago and food services and drinking places sales increased 19.8% from a year ago.
Gasoline sales decreased 2.7% from March after the fuel cost eased and food services and drinking places sales increased 2% in the period.
Grocery store sales declined 0.1% in April from the previous month but rose 8.1% from a year ago.
Retail sales increased for the fourth month in a row and the reported data are not adjusted for price increases.