Earnings season ended with a mixed bag as some major retailers beat estimates and others came up short.
Target (TGT) was the most bullish name, continuing its transformation from big-box boutique to digital powerhouse. CEO Brian Cornell’s combination of delivery services, new products and expansion worked as planned to attract more shoppers at higher margins.
Profit, revenue, comps and guidance for the key holiday-shopping season all surprised to the upside. The results were similar to Wal-Mart Stores (WMT) the previous week.
Home Depot (HD), on the other hand, is still trying to make the shift to e-commerce. That’s driving up technology costs at the same time potential tariffs hit. Meanwhile, sales growth continues to slow. That caused management to cut guidance and gave the stock its biggest drop in almost two years.
Kohl’s (KSS) and Urban Outfitters (URBN) fared even worse, missing across the board and plunging toward their lowest levels in several months. Both are trying to adapt to the new digital landscape, resulting in near-term weakness. Will they succeed over the longer term?
Progress at Lowe’s
Lowe’s (LOW) seems to be making progress in its transformation. Sales missed but the smaller rival of HD boosted its profitability by closing stores and clearing out inventory. That sent its shares spiking to new record highs.
Macy’s (M) also missed on revenue and isn’t keeping pace on the Internet. Weak mall traffic continues to punish the once-mighty department store giant.
Two major chip companies also surprised to the upside: Nvidia (NVDA) and Applied Materials (AMAT). NVDA had rallied into the report and then chopped sideways after beating estimates. Investors are also waiting for new artificial-intelligence (AI) chips. Meanwhile, its key gaming market has slowed.
AMAT, on the other hand, exploded to a new all-time high, fueled by strong demand for mobile and data-center processors. It’s one of the biggest gainers in the S&P 500 this year, along with other chip-equipment companies like Lam Research (LRCX) and KLA Tencor (KLAC).
Two Chinese technology stocks also moved after announcing results. Online retailer JD.com (JD) spiked to a new 52-week high after earnings and revenue missed, but then reversed violently lower. E-commerce solutions provider Boazun (BZUN), on the other hand, plunged more than 10 percent on weak guidance.
In conclusion, another earnings season is winding down. Most retailers continue to struggle with the rise of e-commerce and scaled-back consumption, although a handful of new survivors like TGT and WMT continue to emerge.