Who was the Big Retail Winner this Week?

Every cloud has its silver lining. Last year, the cloud of the pandemic came with a silver lining of wave-after-wave of positive earnings results this year – unlike anything we have seen in over a decade – due to easy year-over-year earnings comparisons. According to FactSet, earnings growth for the S&P 500 stocks is up 89.3% year-over-year.

While earnings have been impressive, we did get some unwelcome economic news this week (at least at first glance). I’m talking about the July retail sales report. Led by a 3.9% decline in car and parts sales, July’s retail sales dipped 1.1%. That missed economists’ expectations for a 0.3% drop. But when you exclude car sales, retail sales only slipped 0.4% last month.

The reality is that July retail sales were up a stunning 15.8% year-over-year. Folks spent $617.7 billion last month. I should also add that retail sales in June were revised higher to show a 0.7% month-to-month increase. So, Americans are still out spending, and that bodes well for the economic recovery.

Remember, the American consumer accounts for nearly three-quarters of our total GDP growth. That’s why it’s vital for consumer spending to remain robust or the economic recovery could stall. Thankfully, despite the weak July retail sales report, consumer spending appears to remain robust. MasterCard even reported that consumer spending was up 11% in July, when you exclude gas stations and car dealerships.

For today’s Market360 article, I’d like to keep with our retail theme and discuss two major retailers that went head-to-head with their second-quarter earnings results this week: Walmart, Inc (WMT) and Target Corporation (TGT). Let’s get right into it!

Walmart, Inc (WMT)

Walmart reported second-quarter earnings on Tuesday morning that topped analysts’ estimates. CFO Brett Biggs stated that “customers flocked to the store for items like luggage, party supplies and apparel as they were coming out of hibernation.” He also mentioned families have been buying backpacks and items for the classroom.

Second-quarter earnings rose 22% year-over-year to $1.78 per share, up from $1.56 per share in the same quarter a year ago. That slightly beat analysts’ expectations for $1.57 per share by 13.2%. Second-quarter revenue rose 2.6% year-over-year to $139.9 billion, also slightly topping estimates for $136 billion.

Walmart also noted that growth of in-store and online sales slowed, when compared to the stockpiling of the earlier part of the pandemic. Same-store sales in the U.S. grew 5.2% higher than the expected 3.3%, but this was still lower than the 9.3% it saw in the same quarter last year. E-commerce sales have dropped significantly, only growing 6% in the second quarter compared to 97% in the year-ago quarter.

Target Corporation (TGT)

Target reported stunning second-quarter results on Wednesday morning. Company management noted, “In the second quarter, our business generated continued growth on top of record increases a year ago, reinforcing Target’s leadership position in retail.”

During the second quarter, Target achieved total revenue of $25.16 billion and adjusted earnings of $3.64 per share, which represented 9.5% year-over-year revenue growth and 7.9% year-over-year earnings growth. The consensus estimate called for adjusted earnings of $3.49 per share on $25.08 billion in revenue, so Target topped earnings estimates by 4.3% and posted a slight revenue surprise.

Target also noted that foot traffic at its stores has increased compared to the second quarter of 2020. Comparable store sales rose 8.7%, while online sales climbed 10% during the second quarter. Total comparable sales jumped 8.9% year-over-year. Target expects total comparable sales to grow in the high single digits in the final two quarters of 2021, which is at the high end of its guidance.

I should also add that Target paid dividends of $336 million in the second quarter, up 3% from $330 million in the second quarter of 2020. The company’s third-quarter dividend of $0.90 per share, which is up from the $0.68 per share dividend paid in the second quarter, will be paid on September 10. All shareholders of record on August 18 will receive the dividend.

To me, Target is the clear winner of this retail earnings battle. Even though both stocks moved higher on better-than-expected earnings, TGT beat out WMT in one very important category: the Quantitative Grade in my Portfolio Grader tool.

Months before WMT reported earnings, my Portfolio Grader flagged Walmart as a “Sell,” largely due to its weak Quantitative Grade, which indicates low institutional buying pressure. In comparison, TGT has been a “Strong Buy” for about a year! It also has an A-rating for its Quantitative Grade.

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I should also note that it beats on WMT in Dividend Grader, too. TGT earns a B-rating, while WMT earns a C-rating.

The bottom line: Target is the star right now.

The Resurgence of the American Consumer

In Growth Investor, I’ve aligned my Buy Lists to benefit from the economic recovery and resurgence of the American consumer. I’ve added strategic consumer plays to both Buy Lists over the past 18 months, which includes Target in November 2020, and I’m pleased to report that they have not disappointed.

I currently have 10 stocks in the Growth Investor Buy Lists that I would consider retail or consumer plays, with five of these companies crushing analysts’ earnings estimates for the most-recent quarter to the tune of 35%! Four of the ten stocks exceeded analysts’ earnings expectations by 40% or more, while one posted a 19.6% earnings surprise.

To get the names of these consumer plays, as well as my most-recommendations, sign up now.

P.S. There’s a great divide opening up in America and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.

It’s free to watch and by doing so I know you’ll be ahead of everyone else struggling to understand what is really going on.

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Target Corporation (TGT)

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