Amazon reports strong 1Q results driven by its cloud-computing unit and Prime Video ad dollars

Amazon has reported strong results for the first quarter, driven by growth in its cloud-computing unit and new advertising dollars from its Prime Video streaming service.

  • Earnings per share: 98 cents vs. 83 cents expected
  • Revenue: $143.3 billion vs. $142.5 billion expected
  • Amazon Web Services: $25 billion vs. $24.5 billion in revenue
  • Advertising: $11.8 billion vs. 11.7 billion in revenue

E-commerce giant generated $143.31 billion in revenue in the first three months of this year, a 13% increase from the previous year. Net income more than tripled to $10.4 billion, or 98 cents a share, from $3.17 billion, or 31 cents a share, a year ago.

Operating income soared more than 200% in the period to $15.3 billion, far outpacing revenue growth, the latest sign that the company’s cost-cutting measures and focus on efficiency is bolstering its bottom line.

“It was a good start to the year across the business, and you can see that in both our customer experience improvements and financial results,” Amazon CEO Andy Jassy said in a statement.

Amazon said first-quarter sales in its cloud computing unit, Amazon Web Services (AWS), amounted to $25.04 billion, up 17% from the same period last year. AWS accounted for 62% of total operating profit.

Jassy said AI capabilities have reaccelerated AWS’ growth rate and it is now on pace for $100 billion in annual revenue.

The company also recently announced a full rollout of a business chatbot called Q that it says can help employees be more productive at work. Amazon also recently finished its $4 billion investment in San Francisco-based AI startup Anthropic, a competitor to Microsoft-allied OpenAI.

Sales in the company’s online advertising business also increased 24%, mostly driven by advertising for sponsored products.

Amazon, which started showing advertisements on Prime Video in late January (which customers can avoid with a $2.99 additional monthly fee), currently has a limited number of ads on the streaming service compared to TV or other streaming providers but are attracting a number of new advertisers who are not currently using Amazon advertising services.

Amazon has recently cut costs in different parts of its business in an attempt to remain profitable. This year, the company cut hundreds of positions across AWS, Prime Video and MGM Studios. Its subsidiaries, the popular social media platform Twitch and the audiobook service Audible, have also laid off workers. The company has laid off more than 27,000 employees since late 2022, with the cuts bleeding into 2024.

In addition, Amazon, facing regulatory hurdles in Europe, cancelled a deal to acquire iRobot in January. It’s also facing a lawsuite filed by the Federal Trade Commission over antitrust concerns.

Amazon remains a standout among mega-cap internet companies in that it’s yet to implement a quarterly dividend, even as cash and equivalents jumped to $73.9 billion in the quarter from $54.3 billion a year earlier. Meta announced its first dividend in February at 50 cents a share, and Alphabet followed, telling investors last week that it will start paying a dividend of 20 cents a share. Those companies also announced plans to buy back tens of billions of dollars in stock.

Sources:
AP News
CNBC
Amazon


 

Canadian Tire reports lower sales in first quarter, cites ‘challenging consumer demand environment’

Canadian Tire Corp. Ltd. reported lower retail sales in Q1 citing a “challenging consumer demand environment.” The declines were primarily in discretionary categories, as shoppers tighten their budgets. As spring and summer seasons approach – where such non-essential categories as home goods and entertainment make up a large portion of sales – Canadian Tire dealers are buying less, leading to reduced shipments to stores.

CONSOLIDATED OVERVIEW

  • Revenue was $3,524.9 million compared to $3,707.2 million in the same period last year, down 4.9% or 5.2% excluding Petroleum.
  • Consolidated IBT was $121.8 million, an increase of $55.2 million, compared to IBT of $66.6 million in Q1 2023 when the Company recorded $67.7 million of costs related to the DC fire. On a normalized basis, IBT was down 9.3%.
  • Diluted EPS was $1.38 compared to $0.13 in the prior year. Normalized diluted EPS was $1.38, up $0.38.

Overall, revenue fell by 4.9 per cent in the quarter compared to the prior year, to $3.5-billion. The first quarter is typically the slowest period of the year for Canadian Tire, as the post-holiday period is for many retailers.

“I think it’s really going to be linked to how consumer demand comes in, and they’re going to more tightly manage it that way,” TJ Flood, president of Canadian Tire Retail, said during a conference call to discuss the company’s first-quarter results. In previous years, he added, store owners were more likely to buy their inventory in advance. But they have begun adjusting that approach this year, shifting to a more reactive strategy.

The company did experience better-than-expected early sales in backyard amusement and outdoor cooking categories this spring and it is continuing to emphasize essential products in its inventory purchases, and will be focused on advertising its own brands to price-sensitive shoppers.

Canadian Tire reported that traffic to its stores fell slightly in the first quarter ended March 30. Comparable sales – an important metric that tracks sales trends at stores open more than a year – fell by 1.6 per cent compared with the same period the prior year, when sales had also fallen by 2.5 per cent on a year-over-year basis.

Canadian Tire’s retail gross profit margin rate was 37.1 per cent, excluding petroleum sales. The gross margin rate was up 1.93 percentage points, exceeding the company’s expectations. The company benefited from lower shipping rates, and from the balance of its product mix, which includes both big national brands as well as private-label products that tend to deliver bigger profit margins.

Canadian Tire reported net income attributable to shareholders of $76.8-million or $1.38 a share, compared with $7.8-million or 14 cents a share in the same quarter the prior year – results that included a $49.8-million impact from the 2023 distribution centre fire. Adjusting for that amount, normalized net income attributable to shareholders in the prior year was $57.6-million or $1 a share.

Sources:
The Globe & Mail
The Toronto Star
Canadian Tire


 

Home Depot sales drop more than expected as wary customers delay big projects

The Home Depot, the world’s largest home improvement retailer, reported sales of $36.4 billion for the first quarter of fiscal 2024, a decrease of 2.3% from the first quarter of fiscal 2023. Comparable sales for the first quarter of fiscal 2024 decreased 2.8%, and comparable sales in the U.S. decreased 3.2%.

Net earnings for the first quarter of fiscal 2024 were $3.6 billion, or $3.63 per diluted share, compared with net earnings of $3.9 billion, or $3.82 per diluted share, in the same period of fiscal 2023.

Customer transactions, or the number of purchases made by Home Depot shoppers at its stores or online, fell 1 per cent in the first quarter, but less than a steep 4.8 per cent drop last year.

Comparable sales fell for the sixth straight quarter, down 2.8 per cent, compared with analysts’ estimates of a 2.09 per cent drop.

First-quarter profit of $3.63 per share edged past estimates of $3.60.

Customers have slashed discretionary spending and put pricey renovations on hold as they adjust to higher borrowing costs and elevated inflation, leading to a turbulent 2023 for home improvement retailers like Home Depot and Lowe’s Cos.

“We continue to see softer engagements in larger discretionary projects where customers typically use financing to fund the projects such as kitchen and bathroom models,” CEO Ted Decker said on a post-earnings call.

Big-ticket transactions for products over $1,000 were down 6.5 per cent in the first quarter from a year earlier, company executives said.

The top U.S. home improvement chain still reaffirmed its fiscal 2024 targets on hopes of a recovery in the back half, believing that interest rate cuts could be a significant re-acceleration in home improvement or maintenance activity as people focus on improving their existing homes.

Meanwhile, Home Depot is bulking up its Pro business segment catering to professional builders and contractors by agreeing in March to buy SRS Distribution, a network of independent roofing, pool, and landscaping distributors in the US, in an $18.25-billion deal. The purchase of SRS Distribution could increase its total addressable market by $50 billion.

Sources:
The Globe & Mail
Yahoo Finance
Home Depot


 

Walmart logo

Walmart reports another strong quarter as it draws in wealthier shoppers

Walmart Inc. announces first quarter results with strong growth in revenue and operating income and raised its full-year forecast, betting that easing inflation will drive stronger sales of groceries and non-essential merchandise like clothing and electronics, sending its shares to a record high in their biggest one-day gain in four years.

Walmart, based in Bentonville, Arkansas, is among the first major U.S. retailers to report quarterly results that could shed more insight into how consumers are feeling, particularly after the government reported an unexpected flattening of spending between March and April.

Globally, eCommerce penetration is higher across all markets led by store-fulfilled pickup & delivery and marketplace. Walmart U.S. comp sales up 3.8%. Looking ahead, the Company issues guidance for the second quarter and expects net sales to increase 3.5% to 4.5% and operating income to grow 3.0% to 4.5%, in constant currency. The Company now expects to be at the high-end or slightly above its previous guidance (cc) for net sales growth of 3.0% to 4.0% and operating income growth of 4.0% to 6.0% for FY25.

Doug McMillon, President and CEO, Walmart commented, “Our team delivered a great quarter. Around the world our goal is simple – we’re focused on saving our customers both money and time. It’s inspiring to see how our associates are simultaneously executing the fundamentals and innovating to make shopping with us more enjoyable and convenient. We’re people-led and tech-powered, and that combination is propelling our business.”

First Quarter Highlights

  • Consolidated revenue of $161.5 billion, up 6.0%, or 5.8% (cc)1, including a benefit of ~1% from an additional selling day
  • Consolidated gross margin rate up 42bps due to improvements across segments, led by Walmart U.S.
  • Consolidated operating income up $0.6 billion, or 9.6%; adjusted operating income up 13.7%1 ,due to higher gross margins and growth in membership income
  • Global eCommerce sales grew 21%, led by store-fulfilled pickup & delivery and marketplace
  • Global advertising business3 grew 24%, including 26% for Walmart Connect in the U.S.
  • Adjusted EPS1 of $0.60 excludes the effect, net of tax, from a net gain of $0.05 on equity and other investments and business reorganization charges of $0.02
  • Global inventory down 2.7%, including a decrease of 4.2% for Walmart U.S.; in-stock levels healthy

Sources:
Global News
The Globe & Mail
Walmart


 

Lowe’s warns of margin pressure in second quarter on muted home improvement demand

Lowes reported net earnings of $1.8 billion and diluted earnings per share (EPS) of $3.06 for the quarter ended May 3, 2024, compared to diluted EPS of $3.77 in the first quarter of 2023, which included a gain associated with the 2022 sale of the Canadian retail business. Excluding this gain, first quarter 2023 adjusted diluted EPS was $3.67.

Total sales for the quarter were $21.4 billion, compared to $22.3 billion in the prior-year quarter. Comparable sales for the quarter decreased 4.1% as the decline in DIY big ticket discretionary spending was partially offset by positive comparable sales in Pro and online.

Lowe’s also warned of operating margin pressure in the current quarter as the home improvement chain expects to see muted demand, overshadowing its smaller-than-expected drop in quarterly same-store sales.

Shares of the company were down as much as 3 per cent after executives said that they expect current-quarter comparable sales decline to be in line with the first quarter.

Same-store sales at Lowe’s fell 4.1 per cent in the first quarter, compared to estimates of a 5.65 per cent decline.

The home improvement retailer’s results echoed those of Home Depot last week. Home Depot missed revenue expectations, which it attributed to a tougher housing market and a delayed start to spring.

“We continue to expect second-half comparable sales to improve … This is not because we are forecasting an improvement in demand trends this year,” CFO Brandon Sink said, adding that the improvement would be due to easier comparisons from last year.

While customers have been willing to undertake smaller repair works, they have largely been tight-fisted with their spending on expensive renovations, hurting sales at home improvement retailers like Lowe’s.

Lowe’s stuck by its full-year forecast. It said it expects total sales of between $84 billion and $85 billion, which would be a drop from $86.38 billion in fiscal 2023. It anticipates comparable sales will decline between 2% and 3% compared with the prior year, and expects earnings per share of approximately $12 to $12.30.

Sources:
The Globe & Mail
CNBC
Lowes


 

Target reports disappointing quarterly results, issues weak forecast as shoppers pull back

Target posted a year-over-year sales decline and missed Wall Street’s earnings estimates, as consumers fatigued from high prices bought both fewer discretionary items and groceries.

The Minneapolis-based discounter’s revenue in the fiscal first quarter was about in line with expectations.

On a call with reporters, CEO Brian Cornell said the company’s results reflect “continued soft trends in discretionary categories.”

Shares fell 10 per cent in early trading after it posted adjusted earnings of $2.03 per share, 3 cents below analysts’ expectations. If the losses are not reversed, the stock will be on track to lose almost half of its value since its all-time high in Nov. 2021.

Key Points

  • Target’s fiscal first-quarter earnings missed estimates, as its sales fell about 3% year over year.
  • The retailer saw consumers buy fewer everyday items like groceries and paper towels along with discretionary goods like apparel and home decor.
  • CEO Brian Cornell said the results show “continued soft trends in discretionary categories.”

Target expects comparable sales in the second quarter will recover from four straight quarterly declines, being flat to up 2 per cent. It expects adjusted earnings of $1.95 to $2.35 per share. Analysts on average had anticipated a comparable sales increase of 1.39 per cent and profit of $2.19 per share.

In the first quarter ended May 4, comparable sales declined 3.7 per cent, in line with expectations.

The company maintained its full-year target, with comparable sales seen flat to up 2 per cent, and earnings of $8.60 to $9.60 per share.

Sources:
The Globe & Mail
CNBC
Target


 

Costco tops revenue estimates on rebound in demand for low-priced discretionary items

Costco Wholesale beat third-quarter revenue expectations, as cash-strapped consumers flocked to its warehouses to grab low-priced discretionary items and groceries.

The membership-only retailer saw strong momentum for its fresh foods and bakery items including newly added products lemon blueberry loaf and morning buns, and chocolate chop cookie as consumers grappling with still-high cost of living preferred cooking more meals at home.

Key Numbers:

Net sales: $58.52 billion

Adjusted EPS: $3.78

Total company comparable sales, excluding fuel: 6.5%,

  • US same-store sales growth: 6%
  • Canada same-store sales growth: 7.4%
  • Other international: 8.5%

E-commerce growth: 20.7%

Membership fees revenue: $1.12 billion

“We’re definitely winning in consumables, as we see the food business and dining away from home has softened up a bit,” CEO Ron Vachris, who stepped into the role in January, said on a call with investors.

In the first quarter, visits to Costco Wholesale were up 8.9% on a year-over-year basis, while visits to Walmart and Target were up 3.9% and 3.5% respectively.

Same-store sales, excluding fuel, jumped 6.5%, led by its growing international business (up 8.5%), Canada (up 7.4%), and the US (up 6%).

The company’s ecommerce comparable sales rose 20.7%, led by gold and silver bullion, gift cards and appliances.

The company also expanded its partnership with Uber Grocery in the US and Canada.

Its logistics business saw deliveries increase 28% year over year. That delivery business competes with Best Buy and offers items like televisions, computers, appliances, tires, and even mattresses.

Membership fees, a key revenue stream, came in line with estimates at $1.12 billion, a 7.6% increase compared to a year ago. In Q3, the company had 74.5 million total paid members, with 34.5 million executive memberships.

Sources:
Yahoo Finance
Reuters
Costco