What’s Going On Here?American retailers Target and Lowe’s both issued quarterly earnings on Wednesday that hit the spot – but only one company was left feeling like a big shot. What Does This Mean?Target’s revenue rose 9.5% last quarter compared to the same period in 2020, driven by strong foot traffic in stores and a boost in back-to-school (rather than back-to-screen) spending. But investors still weren’t happy, sending Target’s stock down almost 2%: the chain’s all-important online sales grew “only” 10%, versus a pandemic-fueled 195% this time last year.
Home improvement retailer Lowe’s, meanwhile, posted a 1.6% drop in same-store sales compared to the second quarter of 2020, when the DIY market was in full swing with people stuck at home. Looking forward, however, Lowe’s increased its sales forecast for the rest of the year by 7%. Investors bought the story and sent the company’s shares up 10% in response, realizing that they may have been too hasty in lumping in Lowe’s with rival Home Depot on Tuesday. Why Should I Care?For markets: More arrows in the quiver?
Target’s share price is up around 40% so far this year, compared to Lowe’s 25%. Companies like the latter were star stocks in 2020, thanks to all those locked-down consumers confined to homes in need of a lick of paint. But with the great economic reopening now well under way, investors are questioning whether they can continue to deliver. Target’s in another boat entirely: its stores sell just about everything under the sun, meaning it’s more likely to benefit from people getting out and about again.
The bigger picture: Ready, aim, buy.
Both Target and Lowe’s unveiled new share buyback programs on Wednesday, worth $15 billion and $9 billion respectively. That’s great news for investors: a company buying its own shares reduces overall market supply, meaning each remaining share represents a greater portion of ownership. Assuming demand is constant, this provides an immediate boost to the company's share price – and to investors' portfolios. | 