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Ahead of handicapping the outlook for the 2022 Q1 period, we want to recap the 2021 Q1 earnings season, with a particular focus on how the Retail sector performed.

Total Retail sector earnings in 2021 Q4 were up +39.9% on +7.5% higher revenues, meaning a strong 140 basis point expansion in net income margins.

With respect to how the group handled inflationary pressures, the picture was generally mixed. Some operators like Target (TGT - Free Report) and Walmart (WMT - Free Report) did really well, while others like Home Depot (HD - Free Report) and Lowes (LOW - Free Report) struggled with these forces. With respect to department stores, the market liked what it saw from Nordstrom (JWN - Free Report), but that was likely more a function of low expectations following the company’s persistent underperformance in recent quarters.

For 2022 Q1, the expectation is for S&P 500 earnings to increase +3.8% on +10.1% higher revenues, implying a compression in net margins.