EC Spotlight On Retail Sector Earnings

The Q4 earnings season has effectively come to an end for most of the major sectors, with the Retail sector as the only one that has a significant number of reports still awaited. It has been a positive and reassuring reporting season in the aggregate, with earnings growth on track to turn positive and an above-average proportion of companies beating top-line expectations. Estimates for 2020 Q1 have come down, but the magnitude of negative revisions still compare favorably to other recent periods despite the virus impact. 

We will discuss what’s happening to current (and following) quarter estimates a little later, but let’s focus on the Retail sector for now which has a number of key operators like Home Depot (HD - Free Report), Macy’s (M - Free Report), TJX Companies (TJX - Free Report), Best Buy (BBY - Free Report) and others on the docket this week. In total, we will get Q4 earnings reports from just over 700 companies this week, including 42 S&P 500 members. By the end of this week, we will have seen Q4 results from more than 95% of the S&P 500 members.

We typically associate the traditional brick-and-mortar operators as belonging in the retail space. But we have a stand-alone Retail sector (the official Standard & Poor’s classification puts the retail space in the Consumer Discretionary and Staples sectors) that not only includes the traditional players but also online vendors and restaurant operators.

For the Zacks Retail sector, one of the 16 Zacks sectors, we have already seen Q4 results from 20 of the 37 companies in the S&P 500 index. Total earnings for these Retail sector companies are +0.4% from the same period last year on +9.4% higher revenues, with 65% beating EPS estimates and 55% beating revenue estimates. The comparison charts below put these Retail sector results in a historical context.

(Click on image to enlarge)

This is a weaker showing than we have seen from other sectors this earnings season, but not in a major way. The coming Retail sector results are not expected to change this picture in a meaningful way.

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