Home Depot (HD) and Kohl & # 39; s (KSS) reported earnings this morning. HD reported growth, but it was not the most inspiring. Kohls reported a surprisingly poor lady. So far, the retail earnings season has not been the brightest.
Home Depot reported Q1 results that hit estimates. For me, the King of Home Improvement continues to make a line between growth (though slower) and liabilities. Home Depot reported strong continued figures in terms of driving sales, rising bills and improved earnings for shareholders. The weak point that still gives me concern is the balance. Home Depot's debt is very high and causes HD to run a shareholder's loss in the form of equity.
Net revenue increased 5.7% to DKK 26.38 billion. The cost of these sales exceeded profits by a 6.3% increase, but we are not getting too fussy. Gross profit rose 4.6% to just over DKK 9 billion. Operating earnings rose 6.4% to $ 3.95 billion. Net profit increased 4.5%. To $ 2.51
Same store sales are an important target for a name like Home Depot, and the retailer reported some gains that were weaker than normal. With a comparable revenue growth of 2.5% in what is probably the most important quarter for HD, it could explain the incorrect pre-market performance of the stock this morning. Home Depot pointed out that growth was affected by the calendar shift from 53 weeks in fiscal policy 2018 to 52 weeks in fiscal policy 2019 along with difficult weather. Nevertheless, it is still something to consider. US-based comp sales rose 3%.
The results were enough for Home Depot to confirm its 2019 guidance. The retailer expects a full-year turnover of 3.3% with a growth of 5%. Annually, 3.3% revenue growth will be the slower expansion rate seen by Home Depot over the past five years. It adds yet another proof that housing is weakening. The dealer expects full-year earnings per share. Share of $ 10.03 per. Diluted share. This would mark an increase of 3.1% year over year. It will also mark the slower earnings increase for HD over the last five years.
Personally, I do not see the appeal in HD. We are too far in the economic cycle, and this stock is dependent on ongoing investment in housing / startups. I think the company has driven earnings through stock purchases and raised a lot of debt to do so. The balance sheet has a deficit of DKK 2.14 billion. USD. Trading around 19x full-year earnings, the premium is not bad. But I think there's a reason for that.
Kohl's earnings direction was much clearer. The retailer lacked discretion and lowered the entire annual guidance. This is a tough one for me, as I have been bullish on the name as an area of potential strength in retail. Revenue fell 2.9% this year to 4.08 billion. Same store sales fell 3.4%. Compared to higher SG & A expenses, net earnings came to $ 62 million against $ 75 million a year ago. This is a decrease of 17% year over year. On a stock basis, earnings fell by 16% to $ 0.38 per share. Share against $ 0.45 per share Share in 2018. On a non-GAAP basis, diluted earnings fell 5%.
This is certainly a disappointing story for me, as I had stated that Kohl's growing partnership with Amazon (AMZN) should act as a place of return would provide a stepping stone to higher sales in the store. Admittedly, the initiative has just started. The stock was down on the 9.2% pre-market (at the time of writing) out of the news. Like many dealers, the valuation for the stock is not very high, so I think the downside this week will be limited to a degree. Nevertheless, a decline in the year-round guidance gives me the impression that the upward direction for KSS is also quite limited. Comp sales are becoming increasingly important to the retail performance, and Kohl is just disappointed in a big way.
The company now expects a full-year earnings of $ 5.15 to $ 5.45 a year. Diluted share. This is in contrast to previous guidance of $ 5.80 to $ 6.15. Conservatively, the new guidance range now means that the stock trades with 11x full-year earnings. Again, it is still beautifully cheap, as guidance no longer suffers. The next quarters are now even more crucial for Kohls. CEO Michelle Gass stated that the year started "slower than we would like", but shot the narrative about the potential of their Amazon return program / some fire launches and what they could mean for the second half.
As a whole, I think we look a little mild about signs from retail. Macy's (M) did not cover the results from the first quarter. J.C. Penney (JCP) announced earnings this morning, which were mostly bleeding money. It does not paint a beautiful picture until the beginning of 2019.
(Home Depot, Kohl and Amazon are holdings in Jim Cramer's Action Alerts PLUS membership club. Please note before Jim Cramer buys or sells HD, KSS or AMZN? Learn more now.)
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