It’s no secret that I’m keeping a close eye on retail stocks. After all, with the consumer being one of the bright spots of the American economy, it pays to invest in stocks that are benefiting from this trend.
And today, we had a number of retail powerhouses report earnings. Let’s take a look and see which retailers made out like bandits—and which were left behind in the dust. Be sure to take a moment to click on each company’s ticker symbol to see how it is ranked in my Portfolio Grader tool.
First up, Burlington Stores (BURL) posted better-than-expected results for the second quarter. Total sales climbed 9.7% while same-store sales rose 5.4% over last year. Burlington Stores posted adjusted earnings of $0.39 per share, which walloped the $0.30 consensus estimate by 30%. BURL rose to an all-time high on the news.
Dollar General Corp. (DG) was an entirely different story. DG shares plunged after the discount store operator underperformed second-quarter expectations. Dollar General posted adjusted earnings of $1.08 per share, missing the consensus estimate by a penny. Dollar General also missed the $5.50 billion consensus sales estimate by 2.0% According to management, Dollar General is on the losing side of a price war with Wal-Mart, and this is taking a bite out of sales and earnings.
Dollar Tree (DLTR) shares also fell after it cut its FY 2016 sales outlook. While the company was targeting sales between $20.79 billion and $21.08 billion previously, it now expects revenues between $20.69 billion and $20.87 billion. Dollar Tree also underwhelmed investors with its Q2 report. The company missed analysts’ EPS estimates by 1.4% and sales estimates by 1.8%.
Sears Holding Corp. (SHLD) was another casualty in the retail sector. The department store chain revealed that same-store sales fell 7%, marking the eighth consecutive quarter of declines. Meanwhile the company’s cash hoard shrank from $1.8 billion a year ago to $276 million. As a result, the company is scrambling to find alternative financing.
If today’s earnings reports were any indication, not all retailers are faring equally in the competitive pricing environment. But, there are bright spots in this sector. In a few hours, we’ll get first-quarter earnings from ULTA Salon Cosmetics (ULTA). Analysts are expecting a solid report, with 21.7% forecasted earnings growth and 20.7% sales growth. I currently recommend ULTA in my Blue Chip Growth newsletter as an A-rated Strong Buy.