Investors got a reprieve from worries about trade with China on Tuesday, with the Trump administration saying it would grant temporary exemptions to the blacklisting of Huawei. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) both rose nearly 1%. Semiconductor stocks, some of which are suppliers to Huawei, regained about half of their losses from yesterday.
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As for individual stocks, retailers Kohl's (NYSE: KSS) and Home Depot (NYSE: HD) both reported sales affected by bad weather in February, but with different effects on the bottom line.
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Kohl's stumbles, cuts guidance
Department store chain Kohl's reported a surprise decline in comparable sales and lowered guidance for the year, causing shares to fall 12.3%. Revenue dropped 2.9% to $4.09 billion, which was still ahead of the analyst consensus of $3.95 billion, but non-GAAP earnings per share of $0.61 missed expectations of $0.67.
A decline in comparable-store sales of 3.4% ended a streak of increases and missed guidance for flat growth, leading CEO Michelle Gass to say in the press release, "The year has started off slower than we'd like, with our first quarter sales coming in below our expectation." The company blamed cold weather, a tough comparison for home products, and aggressive pricing from competitors.
Kohl's slashed guidance for full-year earnings per share from $5.80-$6.15 to $5.15-$5.45, well below the $6.04 Wall Street was expecting. The company expects to be more aggressive in promotions and will see an impact from tariffs on China, where Kohl's sources a little over 20% of its goods. It does expect to see a pick-up in traffic in the second half due to the nationwide rollout of its returns program with Amazon.com.
Home Depot beats profit expectations despite sales headwinds
Home Depot overcame weather challenges in the first quarter, meeting expectations for revenue and exceeding them for profit, and shares inched up 0.3%. Revenue grew 5.7% to $26.4 billion and earnings per share increased 9.1% to $2.27 per share, compared with the analyst consensus of $2.19.
Home Depot said the sales performance came in below the company's expectations due to unfavorable weather in February and lumber price deflation. Comparable sales grew 2.5%, with a 3.8% increase in customer traffic. Without the effects of weather and lumber prices, Home Depot's comparable-sales growth would have been 4.5%, meeting its internal plan. Online sales grew 23% year over year.
Home Depot reaffirmed guidance for the full year, saying it still expects comparable sales to grow 5% and EPS to rise 3.1% to $10.03. However, the home improvement leader did not include in that guidance the effect of China tariffs rising to 25% nor the impact of lumber deflation, which would amount to an $800 million hit to 2019 sales at current prices, leaving investors to ponder the downside risk to the company's forecast.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of AMZN. The Motley Fool owns shares of and recommends AMZN. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.