Wall Street unimpressed with retailers' solid quarter
A trader follows a chart at the New York Stock Exchange. (Photo: AP/Mark Lennihan)
NEW YORK: Wall Street was unimpressed on Tuesday (Nov 20) with mostly solid quarterly results from major US retailers, some of which beat expectations, as investors cast a worried eye on future earnings.
In mid-morning trade toward 1600 GMT, department store chains Target (down 8.8 per cent) and Kohl's (down 9.5 per cent) were helping lead US equities markets lower.
Home hardware retailer Lowe's was down 3.8 per cent while the electronics outlet chain Best Buy was bucking the trend, eking out a healthy gain at 2.5 per cent.Shares were hit by several factors, including high inventory levels as well as pressures on gross margins and comparable store sales, analyst Patrick O'Hare wrote at Briefing.com."Those reasons don't apply in all cases, yet one reason is enough in this market, which is caught up in growth concerns that have led to a de-risking effort," he said.Neil Saunders of GlobalData Retail said Target, for example, was in "extremely good shape."
The company posted a 5.7 per cent jump in sales for the three months ended Nov 3 while net income soared 30.2 per cent, he noted.But the rosier results were due in large part to lower net interest and other expenses, and lower taxes, with operating profits actually falling.The 3.3 per cent dip in profits reflected several pressures such as higher wages, higher costs for fulfillment and investment, and falling gross margins, he said."Some on Wall Street may lament the dip but the truth is you cannot reinvent a retailer on the cheap. Target is not doing that and we applaud them for it," he said in an analytical note.
As for Kohl's, it raised its annual profit forecasts after having revealed higher-than-expected earnings per share and revenues that matched expectations."Overall, this is another good set of numbers from Kohl's. However, there is no denying that growth has slowed," said Saunders.While Lowe's had an unexpectedly good quarter, its forecasts were still a little disappointing to investors.Meanwhile, Best Buy also posted better-than-expected revenues and earnings per share but nudged up its annual forecasts.
Source : https://www.channelnewsasia.com/news/business/wall-street-unimpressed-with-retailers-solid-quarter-10951484