Retail Earnings Power Market Rebound

Barry Adams
16 Aug, 2022
New York City

U.S. stocks inch higher and investors digested the latest earnings from retailers and awaited the release of the Fed's minutes of meetings on Wednesday.  

Retailers traded higher after better-than-expected quarterly results from Home Depot and Walmart.  

Bed Bath & Beyond soared nearly 70% after Reddit traders ramped up buying following the news that the GameStop chairman Ryan Cohen purchased 1.6 million call options with strike prices between $60 and $80 a share. 

Natural gas prices continued to advance after several regions in the U.S. continue to experience above average temperatures. 

Stocks struggled in the first two hours of trading following the weakness in tech and semiconductor stocks. 

The strength in the retail sector lifted benchmark indexes above the flat-line in choppy session. 

The S&P 500 index increased 0.2% to 4,306.20 and the Nasdaq Composite index fell 0.2% to 13,103.93. 

Futures of crude oil declined $2.55 to $86.88 a barrel and natural gas increased 45 cents to $9.14 a thermal unit. 

The yield on 10-year U.S. Treasury notes increased 5 ticks to 2.84% and 2-year notes rose to 3.24%. 

Ally Financial increased 3.4% to $36.92 after the Berkshire Hathaway's latest 13-F regulatory filing showed that the company tripled its stake in the online bank in the second quarter.  

Home Depot Inc added 5.7% to $332.56 after the home improvement retailer said second quarter sales rose 6.5% to $43.8 billion. 

Net income in the quarter rose to $5.2 billion or $5.05 a diluted share compared to $4.8 billion or $4.53 a diluted share a year ago. 

U.S. comparable sales increased 5.4% in the quarter and customer transactions declined 3% to 467.4 million but the average ticket size rose 9.1% to $90.02. 

The retailer reaffirmed its total and same store sales guidance for the fiscal year 2022 to 3.0% and diluted earnings per share to grow in mid-single digits percentage. 

ThredUp soared 16.4% to $3.59 after the online apparel resale platform operator said second quarter total revenues increased 27% to $76.4 million. 

Gross margin in the second quarter fell to 68.9% from 73.6% a year ago. 

Net loss in the quarter expanded to $28.4 million from $14.4 million a year ago. 

Active buyers increased 29% to 1.7 million and active orders soared 40% to 1.7 million in the second quarter. 

The retailer guided third quarter revenues between $64 million and $66 million and gross margin between 65% and 67%. 

Walmart Inc increased 6.2% to $140.81 after the retailer reported better-than-expected revenues and earnings in the second and also lowered its decline in annual earnings than previously expected.  

Total revenues in the second quarter increased 8.4% to $152.9 billion and net income rose 20.4% to $5.2 billion from $4.3 billion a year ago. 

Diluted earnings per share increased $1.88 from $1.52 a year ago. 

Comparable sales, excluding fuel, increased 6.5% at the U.S. Walmart location and surged 9.5% at Sam's Club.  

The retailer said full-year total sales are expected to rise 4.5% and the U.S. sales, excluding fuel, are estimated to increase 4% and in the second-half expand 3%. 

Ziprecruiter Inc dropped 7.3% to $19.45 after the online employment website operator said second quarter revenues increased 31% to $239.9 million. 

The company swung to net income of $13.1 million from a loss of $53.3 million a year ago. Diluted earnings per share were 11 cents compared to a loss of 55 cents. 

Ziprecuiter stock declined after the company said during the conference call with investors that the demand for employees began to soften towards the end of the quarter.