Wal-Mart Puts a Damper on Retail, Consumer ETFs
February 20th at 8:33am by Tom Lydon
Wal-Mart (NYSE: WMT) reports quarterly earnings later this week, but analysts are not upbeat after an internal email warned of slowing sales. February has been one of the most unimpressive months for sales with this retailer and focused exchange traded funds could fall out of favor.
“In case you haven’t seen a sales report these days, February month-to-date (MTD) sales are a total disaster. The worst start to a month I have seen in my ~7 years with the company,” Jerry Murray, Vice President of finance and logistics for Wal-Mart, said in a story that Bloomberg News broke. [Stock ETF Investors Could Win No Matter Who is President]
The watered down sales estimates for the first quarter trail fourth quarter earnings that, on average, beat earnings estimates, according to FactSet Research. Of the 386 consumer focused companies that reported 4Q earnings, 81% of consumer staples beat analysts expectations however, for 1Q 2013, earnings for the entire S&P 500 are down 0.04%.
SPDR Consumer Staples Select Sector (NYSEArca: XLP) and the Consumer Discretionary Select Sector (NYSEArca: XLY) have risen about 7% year-to-date since the start of 2013. Together, the two ETFs account for about 22% of the S&P 500 equity index. [Defensive ETFs to Shield Against the Fiscal Cliff]
Negative trends that have impacted consumer spending include the higher payroll taxes that took effect January 1, 2013. Wal-Mart analysts say for a family earning $50,000, this can equal a shopping cart of groceries per month, reports ETF Guide. Furthermore, the recent rise in gas prices is not giving consumers a break.
The general attitude of investors has been more upbeat, causing a “risk-on” attitude, possibly contributing to less interest in consumer stocks and ETFs. Investors will be looking forward to the Wal-Mart earnings that are expected Thursday. [Going International with Consumer Staples ETFs]
SPDR Consumer Staples Select Sector
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.