Q3 2022 U.S. Retail Scorecard - Update

To date, 179 of the 204 companies in our Retail/Restaurant Index have reported their EPS results for Q3 2022, representing 88% of the index. Of those companies that have reported their quarterly results so far, 70% announced that profits beat analysts’ expectations, while 1% delivered on-target results and 29% reported earnings that fell below estimates. The Q3 2022 blended earnings growth estimate now stands at 3.8%.

The blended revenue growth estimate for the 204 companies in this index is 9.2% for Q3 2022. Of those companies that have reported their quarterly results so far, 66% announced revenue that exceeded analysts’ expectations and the remaining 34% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: Refinitiv Earnings Dashboard

(Click on image to enlarge)

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

This week’s Q3 2022 earnings highlights

This week’s StarMine data shows that Ulta Beauty is likely to beat its Q3 earnings estimates and post a positive surprise. The retailer currently has an EPS consensus estimate of $4.15. However, there’s a five-star rated analyst with a very accurate rating that published a Bold Estimate of $4.66, suggesting that Ulta is very likely to beat earnings and post a positive surprise.

Despite facing a difficult comparison from a year ago, the beauty retailer also has a robust SSS estimate of 8.9%, indicating a boost from consumers who want to look good as they return to the office and also book some vacation travel.

Target’s collaboration with Ulta is paying off. In its earnings call earlier this month, Target said “Ulta Beauty at Target offerings nearly tripled their total sales volume when compared to this period a year ago.” (Source: Target’s Q3 2022 Earnings Call)

The following chart displays estimates of earnings and same store sales expectations for retailers that are scheduled to release Q3 2022 results this week.

Exhibit 2: Same Store Sales and Earnings Estimates–Q3 2022

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Source: Eikon Workspace

Black Friday/Cyber Monday deals

Meanwhile, U.S. retailers ramped up Black Friday and Cyber Monday deals. This year, a whopping 42% of U.S. retail online merchandise was on sale for Black Friday and Cyber Monday (Exhibit 3). Refinitiv discovered this in a collaboration with StyleSage, which analyzes retailers, brands, online trends, and products across the globe.

The current discount penetration (how much of the assortment is on sale) of 42% is also above the YTD average of 35%, and back to pre-pandemic levels, when the average discount rate was 42%.

Meanwhile, the average percent discount in November is 37.3%; this is slightly below the YTD levels of 37.7% and is below the pre-pandemic levels of 41.9%. This means that retailers are offering a wider amount of merchandise on sale, but the average discount is less than usual in order to protect margins.

Exhibit 3: US Online Retail: Discount Penetration and Average Discount –2019 – Nov 2022

(Click on image to enlarge)

Source: StyleSage Co. 

Still, there are some sectors that are more promotional than others, especially with off-season merchandise. This suggests that retailers are still trying to move the previous season’s inventory with steep promotions. At the category level, average discounts have gone up the most across shorts, skirts, and swimwear (Exhibit 4).

Exhibit 4: YOY% Change in Average Discount within the Specialty Category

Source: StyleSage Co. 

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