To date, 160 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2023, representing 80% of the index. Of those companies that have reported their quarterly results, 78% announced profits that beat analysts’ expectations, while 5% delivered on-target results and 17% reported earnings that fell below estimates. The Q2 2023 blended earnings growth estimate now stands at 19.4%.

The blended revenue growth estimate for the 199 companies in this index is 3.3% for Q2 2023. Of those companies that have reported their quarterly results so far, 63% announced revenue that exceeded analysts’ expectations and the remaining 37% reported that revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard

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Source: I/B/E/S data from LSEG

This week in retail

Macy’s, Inc. beat its Q2 revenue and earnings estimates. However, Macy’s (owned-plus-licensed) posted a -7.3% SSS, below its -6.5% SSS estimate, while Macy’s (owned basis) reported a -8.2% comp. The retailer said that inventory levels are lean going into fall, and its beauty category is still the strongest performer. Still,  shrinkage continues to be an issue. Like many retailers, Macy’s also echoed the ongoing shift towards services and experiences.

The department store reiterated its full year guidance and said, “To level set, we continue to have a cautious view on the consumer. In addition to the headwinds discussed on prior earnings calls, the expiration of student loan forgiveness beginning in October, higher interest rate levels and lower new job creation are all new pressures on the consumer. While we had contemplated these factors when providing an annual outlook on our last earnings call, it is still unknown how consumers will respond to them, especially after so many months of increased pressures” (Source: M Q2 2023 Earnings Call).

Here are the Q2 2023 earnings and same store sales estimates for the companies reporting this week:

Exhibit 2: Same Store Sales and Earnings Estimates–Q2 2023

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Source: LSEG I/B/E/S

Guidance and inflation

Inflation, the ongoing shift towards services, and a cautious consumer are still big concerns for retailers. Of the 160 retailers that have reported Q2 earnings, 94 mentioned inflation. Today, Lowe’s reaffirmed its full year guidance and said during its call that “as we think about our range for the full year, we believe the range is practical and it reflects a measured approach given the various potential scenarios and outcomes, we still [see] — as we look at the back half, still significant macro uncertainty, inflation, interest rates, a more cautious consumer especially on the discretionary side. There’s also variables such as the student loans and the uncertainty there with the moratorium.” (Source: Lowe’s Q2 2023 earnings call)

Looking ahead to Q3 2023, 18 retailers issued negative preannouncements, while 14 issued positive EPS guidance so far. Of those retailers offering revenue guidance, 17 warned of disappointing results, while only 12 said revenue might be better than previously expected.

Exhibit 3: Earnings and Revenue Guidance: Q2 2023 and Q3 2023

Source: LSEG I/B/E/S

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