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Q1 Retail Earnings: Walmart (WMT) And Amazon (AMZN) Lead Pack

Wal-Mart Stores, Inc. WMT reported its fiscal first-quarter results Thursday morning, effectively capping off what has been a busy earnings season in the retail sector. While Wal-Mart and online giant Amazon.com, Inc. AMZN have shown strength, their competitors seem to be lagging behind.

Wal-Mart was able to beat both earnings and revenue expectations. The company reported first quarter earnings of 98 cents, cruising past the Zacks Consensus Estimate of 88 cents. Quarterly revenues came in at $115.9 billion versus our consensus estimate of $112.7 billion.

(Also Read: Wal-Mart Q1 Earnings and Sales Beat)

In a retail environment where many are struggling to even get customers in the door, Wal-Mart faced different challenges. Currency fluctuations cost the company $3.5 billion in the quarter, and increased investments in e-commerce combined with higher wages put a dent in its operating income.

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Operating income was down 7.1% year-over-year to $5.28 billion. On a constant currency basis, operating income declined 4.6%. On a more positive note, Wal-Mart’s investment in e-commerce is paying off. Total sales in the segment were up 7% on a constant currency basis.

Similarly, Amazon crushed estimates as well. Amazon posted first-quarter earnings of $1.01 per share, which absolutely trounced the Zacks Consensus Estimate of $0.61 per share. Quarterly revenues of $29.128 billion also beat our consensus estimate of $27.943 billion.

(Also Read: Amazon Crushes Q1 Earnings)

Operating income of $1.071 billion was up from just $255 million in the year-ago quarter. Amazon’s recent profits have been boosted by incredible growth in its Amazon Web Services segment. AWS accounted for over $2.5 billion in revenue this quarter, up from $1.5 billion last year. It is interesting to note that Amazon’s fast growing segment is outside of the typical retail landscape.

(Also Read: Amazon Q1 Earnings In-Depth: Web Services Up 64%)

The struggles of the rest of the retail segment is best exemplified by Macy’s, Inc. M, which missed revenue estimates by over 3%, and Target, Inc. TGT, which also saw slumping revenue. Following their earnings announcements, Macy’s and Target fell about 8% and 15%, respectively.

While revenues across the retail board were disappointing, the decline in share prices has much more to do with weak guidance coming out of the segment. For example, on April 14, second-quarter growth estimates were at 2.8% for the retail sector. A month later, that number currently stands at just 0.5%.

As the retail market struggles with a weakening global economy, the biggest winners thus far have been the giants of the industry. On paper, it looks like investment in e-commerce and continued product diversification are both things that the rest of the sector should look into.

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AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
TARGET CORP (TGT): Free Stock Analysis Report
 
MACYS INC (M): Free Stock Analysis Report
 
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