The stock market came into the holiday-shortened week Tuesday on an uncertain note, with rapidly developing events in Ukraine showing how serious investors are about conflict with Russia. As of 8:15 a.m. ET, futures on the Dow Jones Industrial Average (^DJI 0.40%) were down 63 points to 33,944. S&P 500 (^GSPC 1.02%) futures had declined 6 points to 4,338, while Nasdaq Composite (^IXIC 2.02%) futures were down 71 points to 13,925.
The consumer economy makes up a huge part of overall business activity in the U.S., and while the COVID-19 pandemic has put huge strains on typical Americans, measures that the government has taken to provide financial assistance did their part to prevent full-blown economic collapse. As those government measures have phased out, however, some have been concerned about the potential impact on retail stocks. In that light, Tuesday morning's reports from The Home Depot (HD 0.94%) and Macy's (M 0.44%) were quite illuminating and have a lot to say not just to their shareholders but to the broader investment community.
Image source: Getty Images.
Home Depot keeps building its business
Shares of Home Depot were volatile in premarket trading on Tuesday morning. The home improvement retailer's stock initially climbed following the release of its fourth-quarter financial results, but by 8:15 a.m. ET, it had fallen more than 2%.
The numbers from Home Depot's report were encouraging. Sales of $35.7 billion in the fourth quarter of 2021 were up 10.7% year over year, with comparable sales climbing 8.1%. Net income came in at $3.4 billion, producing a 21% rise in earnings to $3.21 per share.
Home Depot's full-year results were even stronger. 2021 revenue topped $151 billion, rising 14.4% from 2020 levels. Earnings of $15.53 per share were up more than 30% year over year.
Moreover, shareholders also celebrated Home Depot's decision to share more of its profits with them. The home improvement retailer boosted its dividend by 15% and will now pay out $1.90 per share each quarter.
Yet as many companies have seen, Home Depot didn't seem to satisfy its investors with its 2022 guidance. The company predicted only "slightly positive" sales growth, with earnings per share likely rising by low single-digit percentages. That slowdown isn't surprising given the huge growth Home Depot has seen over the past two years, but shareholders are still seeing it as disappointing.
Macy's moves higher
Elsewhere, investors reacted more positively to news from Macy's. The department store retailer's shares gained about 5% in premarket trading Tuesday morning after its release of fourth-quarter financial numbers.
Macy's saw a terrific bounce from past performance. Holiday-quarter sales rose 28% year over year to $8.67 billion, which was also 4% higher than Macy's sales from two years ago before the pandemic hit. Adjusted earnings of $2.45 per share were more than triple year-ago levels and were 16% higher than in the fourth quarter of 2019.
More broadly, Macy's kept up positive momentum on many fronts. Digital sales were up 12% in the past 12 months and were 36% higher than in 2019. The retailer boasted 7.2 million new customers overall, which was 11% above figures from two years ago and further reflects the efforts Macy's has made to expand its digital channel.
Investors were also pleased that Macy's intends to deploy its $2.3 billion in free cash flow during 2021 toward shareholder-friendly moves. Having reduced much of its debt, Macy's boosted its recently reinstated dividend by 5% to $0.1575 per share quarterly, and it authorized a new $2 billion stock repurchase program.
Pent-up demand from consumers is keeping retailers healthy. It's unclear how long those positive effects can continue, but as more retail stocks report their latest results, it'll be interesting to see the winners emerge and distance themselves from their less successful counterparts.
