Learn More About Retail Sector Earnings

This week, a number of big retail companies reported their first quarter earnings.

It’s worth paying attention because retail is one of the largest sectors making up the economy, with more than 1 million private stores, and approximately $300 billion in monthly sales, according to the National Retail Federation trade group.

Several large chains in the traditional retail sector had a hard time in the first quarter, with mega-stores including J.C. Penney and Kohl’s reporting declines in sales as consumers shop more online and as tariffs from the trade war have hit retailers. Others in the sector scored some gains, however.

Here are some details about the performance of Best Buy, Home Depot and Target, three of the largest retailers in the U.S.

Home Depot earnings

Home Depot reported $26.4 billion in sales in its first quarter, an increase of 5.7% compared to the first quarter of 2018.

• It reported a profit of $2.5 billion, an increase of 4.5% compared to the same quarter a year ago. Reminder: profit is sometimes referred to as net income. It’s what a company clears after it pays its expenses.
• Same store sales—or sales of Home Depot’s stores open for at least one year—reportedly increased 3% in the U.S., less than the analyst estimates of 4.2%, according to reports.
• Home Depot reported earnings per share (EPS) of $2.27, beating analyst expectations of $2.18, according to CNBC. EPS is essentially the company’s profit allocated on a per share basis.

Home Depot executives reportedly have said they expect to lose $1 billion over time as a result of new tariffs from China.

Target’s e-commerce business

Target’s e-commerce sales surged 42% in the quarter, according to its earnings report, as more customers ordered online and then picked up their purchases in store parking lots, or in stores within an hour of making purchases.

• Target reported a total revenue of $17.6 billion, compared to revenue of $16.7 billion for the first quarter of 2018.
• Same-store sales increased by 4.8%, compared to 3% for the first quarter of 2018.
• Target reported earnings per share of $1.53, an increase of 16% compared to the same period a year earlier.
• For the year ahead, however, Target forecasts same-store sales growth in the low to mid-single digits.

Best Buy and the Geek Squad

The electronics retailer beat analyst expectations with better than expected earnings, according to sources.

It expanded its profit margin thanks to higher cost services such as Geek Squad, its tech support service, according to Reuters. However, Best Buy reportedly announced that new tariffs on Chinese products would force it to increase product prices for customers.

Note: Best Buy is reporting for its fiscal year 2020.

• It reported total revenue of $9 billion for the current quarter, about equal to its revenue for the first quarter of 2019.
• Best Buy reported a profit of $265 million, an increase of 27% compared to the first quarter of 2019.
• Same-store sales in the U.S. increased 1.3%, compared to an increase of 7% for the first quarter a year ago. Online sales in the U.S. increased 14.5%, compared to an increase of 12% for the same quarter in 2019.
• Best Buy reported earnings per share of 98 cents in the first quarter, compared to 72 cents for the same quarter a year ago.

Special note: Some companies—such as Best Buy—may follow a fiscal year that can differ from the regular calendar year, which ends December 31. The current calendar is in the second quarter, which ends June 30. Home Depot and Target are now reporting their fiscal first quarter earnings for 2019. Best Buy is Reporting for its first quarter 2020.

You can find out more about earnings here.

Remember the Stash Way!

All investing carries risk, and it’s possible for stocks, bonds, and other securities to lose money.

Stash recommends following the Stash Way, which includes regular investing, diversification, and investing for the long term.

When you buy single stocks,  you run the risk of not being diversified.

Diversification means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. That means you won’t put all of your money in too few stocks, bonds, or funds.

When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).

By diversifying, you’ll be choosing investments in numerous economic sectors—not just the hot industry of the moment—as well as in different geographies around the globe.

If you purchase Best Buy, Home Depot, and Target stock, you could be increasing your investment risk by owning single stocks. If you already own these stocks and you buy more of them, you could increase the risk of being overexposed to these companies.