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Housing Data Cooling; Target, Lowe's Mixed in Q1

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Wednesday, May 18, 2022

Pre-market indices are giving away some of the gains they’ve built this week so far, as more mixed-to-disappointing data from the Retail space in this final leg of Q1 earnings season is informing market participants. The Dow is -280 points at this hour, the S&P 500 is -50 and the Nasdaq is -200.

Housing Starts for April are out this morning, with overall strength in the market noticeably cooling: new starts dropped -0.2% month over month to 1.72 million, down a bit from the 1.75 million expected. This follows a downwardly revised -2.8% March print. Still, we’re at historically high levels, but higher mortgage rates and continued supply-chain issues look to be having some effect. New starts tumbled in the Northeast and Midwest, but remained up in the South and West.

The biggest hit to new starts was in the higher-impact single-family home segment, which fell -7.3% to 1.1 million units for the month. Multi-family, the smaller and less-profitable segment, gained +16.8% to 612K in the month, but it wasn’t enough to make up for the dearth in single-family.

Building Permits, also for April, were in-line with expectations at 1.82 million units, but still down -3.2% month over month. Again, single-family led the way downward, though multi-family permits were also marginally lower, and only gained in the South region. Permits are a proxy for future housing starts.

Target TGT posted Q1 earnings reminiscent of yesterday’s disappointing quarter from Walmart WMT, missing earnings per share by -27% in the quarter to $2.19 per share, although the big-box retailer did post a +2.6% beat on the top-line to $25.17 billion. Same-store sales were up +3.3% in the quarter, but profits were down. The company cited transportation and freight costs, and also came up short on inventories of things like toys for kids’ birthday parties. Shares are getting pummeled: -25% ahead of the open. For more on TGT’s earnings, click here.

Lowe’s LOW Q1 performance was also mixed, but in reverse from Target’s numbers: earnings of $3.51 per share beat the Zacks consensus by +8.3%, while sales missed slightly to $23.66 billion in the quarter. Shares are -4% ahead of the morning bell, adding to the -24% share performance year to date. For more on LOW’s earnings, click here.

Looking back, it would seem these reccurring issues related to supply in demand in Retail stymied a good number of companies this quarter, and those who performed better than expected, like Home Depot HD, were the outliers. While we have seen some residual strength among consumers in other economic data recently, we look to company boards of these retail companies to put together more complimentary strategies for growth in the coming quarters.

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Target Corporation (TGT) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
 
The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
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