EC The Retail Sector's Strong Earnings Performance

Retail Sector Scorecard

For the Zacks Retail sector, one of the 16 Zacks sectors, we have already seen Q3 results from 27 of the 34 companies in the S&P 500 index. Total earnings for these Retail sector companies that have reported already are up +20.4% from the same period last year on +11.4% higher revenues, with 92.6% beating EPS estimates and an equal proportion beating revenue estimates.

The comparison charts below put these Retail sector results in a historical context.

As you can see above, an above-average proportion of retailers have been able to beat estimates thus far. That’s a behavior we have seen across the board from all sectors, with a much higher proportion of companies beating EPS and revenue estimates this earnings season.

With respect to the sector’s Q3 earnings and revenue growth pace (+20.4% earnings growth on +11.4% revenue growth), the picture changes meaningfully once Amazon’s results are removed from the sector’s aggregated reported numbers.

The online vendor accounts for roughly 42% of the sector’s total market capitalization in the S&P 500 index and accounts for 22.1% of the sector’s total earnings that have come out already. We know that Amazon’s Q3 earnings were up +196.7% on +37.4% higher revenues.

Excluding contribution from Amazon, the Zacks Retail sector’s Q3 earnings would actually be up only +3.1% on +6.8% higher revenues.

The chart below shows the sector’s growth comparison on an ex-Amazon basis.

For Q3 as a whole for the sector, combining the results that have come out with estimates for the still-to-come companies, total earnings are expected to be down +20.2% from the same period last year on +10.9% higher revenues. Excluding Amazon, the sector’s Q3 earnings would be up +4.1% on +6.9% higher revenues.  

All in all, it is hard to call the sector’s Q3 results as anything but positive and strong, the seemingly never-ending department store pain notwithstanding.

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William K. 1 month ago Member's comment

An interesting article, telling us the details of what should be obvious: There is a plague going around and people are dying! This is going to have an overall negative effect, relative to the times prior to this plague.

As for the organizations that are still doing well, there was clearly a need to alter the mode of sales already clear to some of them. My experience has been with Home Depot, which already was well into the on-line buying scene. So for them it was just a case of needing to expand an existing mode. The only new feature was adding delivery to buyers sitting in the designated parking spots.

The ones able to make the switch rapidly have prospered. The much smaller businesses have suffered, with many closing. That accounts for part of the rise of the giants.

So certainly there are changes happening, and only half of all changes are for the better.