Today's stock market
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Retail stocks led the market in anticipation of earnings, with the SPDR S&P Retail ETF (NYSEMKT:XRT) up 1.6%. Utilities lagged on falling bond prices; the Utilities Select SPDR ETF (NYSEMKT:XLU) fell 0.8%.
Macy's surges on sales gains
Shares of Macy's soared 10.8% to a new 52-week high after the company announced first-quarter results that soundly beat Wall Street expectations. Sales increased 3.6% to $5.54 billion, while earnings per share excluding asset sales and impairment charges came in at $0.42, up from $0.12 in the period a year earlier. Analysts were expecting the company to earn $0.35 per share on sales of $5.39 billion.
Comparable sales on an owned-plus-licensed basis jumped 4.2%, and after subtracting out the effect of shifting its "Friends and Family" sale from Q2 last year to Q1 this year, were still up a strong 1.7%. Online sales increased double digits, and gross margin improved from 38.3% last year to 39%.
Looking forward, Macy's expressed optimism about the year and raised its guidance. Total 2018 sales are now expected to range from a 1% decline to an increase of 0.5%, compared with earlier guidance of a decline of between 0.5% and 2%. Comparable sales are expected to increase between 1% and 2%, a bump of a percentage point. EPS guidance was raised $0.20 to a range of $3.75 to $3.95.
"Our first quarter performance reflects solid execution of our North Star Strategy, including merchandising and marketing activities," said CEO Jeff Gennette in the press release. "We also saw continued healthy consumer spending and significant improvements in international tourism."
The results and positive comments about consumer spending boosted the entire retail sector, and strengthened investors' belief in the company's turnaround.
Tencent rides growth in gaming, online services
Chinese online giant Tencent announced strong first-quarter revenue and profit growth that easily beat expectations, and the stock bounced 6.8%. Revenue jumped 48% to 73.5 billion yuan ($11.7 billion), well ahead of expectations of roughly 71 billion yuan. Net profit increased 61% to 23.3 billion yuan ($3.7 billion), while analysts were expecting only 17.5 billion yuan. Non-GAAP EPS came in at 1.915 yuan ($0.31), up 28% from the period a year earlier.
The strongest growth came from revenue from smartphone games, which was up 68%; online advertising, which grew sales 55%; and a 111% jump in revenue from "other businesses," which includes Tencent's payment solution business and related financial services, as well as its cloud services business. Net margin increased to 33% from 29% in Q1 last year.
"In the first quarter of 2018, we launched the popular tactical tournament mobile games and enhanced the capabilities of widely used services such as our Weixin Mini Programs, deepening engagement across our social, games and media platforms," said CEO Ma Huateng in the press release. "We drove adoption of our infrastructure services, seeing notable progress in areas such as mobile payment, cloud services, online financial services, and smart retail."
Despite decent results from Tencent last quarter, investors have been nervous about the company's intention to increase investments in 2018, as well being generally skittish over trade relations with China. The latest numbers show that growth and margins are quite healthy, and investors put aside their worries over trade for now.