Retailers Rebound as Tech Traders Sell the News: Earnings This Week

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Retailers Rebound as Tech Traders Sell the News: Earnings This Week

The last week of earnings saw big rallies by old-fashioned retailers. Software companies also beat estimates, but failed to advance.

Foot Locker (FL) led the charge by crushing consensus on its top and bottom lines. Same-store sales, a key metric showing the performance of established locations, spiked 9.7 percent — more than twice the 4.6 percent forecast. The news followed bullish news on February 20 reflecting growth potential in Asia.

Target (TGT) had its own standout quarter, with CEO Brian Cornell rattling off five key areas where the big-box merchant gained market share. Its same-store sales also beat, while digital business swelled more than 25 percent.

Then you had clothing chain Abercrombie & Fitch (ANF). Again, same-store sales rose more than expected and online orders continued to replace shopping malls. Kohl’s (KSS), another blast from the past, ripped as new partnerships managed to draw more traffic than feared. Both ANF and KSS beat on profit.

Failed Breakouts for Software

Retailers probably rose so much because sentiment was pessimistic going in. Software makers, on the other hand, rallied into their results. That didn’t leave much room for good news.

Just look at Salesforce.com (CRM), which put cloud computing on the map last decade. Earnings and revenue both surpassed expectations, but guidance was the slightest bit weak. The result? No breakout for CRM.

Splunk (SPLK) chart showing failed breakout and 50-day moving average.

Speaking of no breakouts, Splunk (SPLK) hit new highs after beating estimates across the board. Then the sellers came and smashed the data-mining and business-analytics company down to its 50-day moving average.

Ditto for VMware (VMW), Workday (WDAY) and Autodesk (ADSK). Ciena (CIEN), which makes fiber-optic hardware rather than software, received similar treatment.

A pair of Chinese technology stocks fared better: travel-agency Ctrip.com (CTRP) and esports operator Huya (HUYA). Both spiked at least 20 percent on their results.

Saving the Worst for Last

There were losers, however. Nutanix (NTNX), once an exciting cloud-infrastructure name, had its worst drop ever after warning of a big revenue slowdown. Children’s Place (PLCE) also crashed on weak same-store sales.

Kroger (KR) is also down sharply today after profit and sales lagged the Street. The grocery giant is eating margin to invest in new businesses like digital orders as its market continues to change.

Three other important companies provided weak incremental guidance without officially reporting quarterly results:

  • General Electric (GE): Just when investors thought the bad news was over, CEO Larry Culp starts talking about negative free cash flow in its industrial business.
  • Walgreen Boots Alliance (WBA): Management warned about reimbursement pressures, echoing similar comments by rival CVS Health (CVS) a week earlier. Related companies like Amerisourcebergen (ABC), Cardinal Health (CAH) and McKesson (MCK) followed.
  • Tesla (TSLA): Elon Musk’s electric-car maker cut prices and its sales force. That has Wall Street questioning the brand’s cache with drivers.

This is our last recap this earnings season. It’s been an interesting set of numbers with plenty of new winners emerging. Keep reading Market Insights in coming weeks for the latest trends and check back for more earnings next month.

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