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To date, 145 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2024, representing 73% of the index. Of those companies that have reported their quarterly results, 71% announced profits that beat analysts’ expectations, while 4% delivered on-target results and 25% reported earnings that fell below estimates. The Q2 2024 blended earnings growth estimate now stands at 12.9%.

The blended revenue growth estimate for the 199 companies in this index is 3.5% for Q2 2024. Of those companies that have reported their quarterly results so far, 49% announced revenue that exceeded analysts’ expectations and the remaining 51% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard

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Source: LSEG I/B/E/S

This week in retail

Home Depot reported better than expected Q2 earnings and revenue. However, same store sales (SSS) came in below expectations of -1.8%, with a -3.3% SSS. Total sales include $1.3 billion from its recent acquisition of SRS Distribution, Inc., which represents approximately six weeks of sales in the quarter. During its earnings call, the home improvement retailer said that it is still performing while facing “higher interest rates and greater macro-economic uncertainty [that] pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.” Bad weather also affected sales of spring merchandise in Q2.

“Big ticket count transactions for those over $1,000 were down 5.8% compared to the second quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund projects such as kitchen and bath remodels.” (Source Home Depot Q2 2024 earnings call)

Still, Home Depot’s e-commerce sales grew more than expectations of 0.3%, with a robust 4.0% growth. In Q2, nearly half of Home Depot’s online orders were fulfilled through their physical stores, suggesting that the omnichannel proposition is key to shoppers. The retailer also said it saw an improvement in gross margins, driven primarily from lower transportation cost and shrink, and partially offset by acquisition.

Moreover, DIY and pros are cautions and are holding back on home improvement projects due to concerns about the economy. As a result, Home Depot said a more cautious outlook for the year is warranted.

Meanwhile, Starbucks hired Chipotle CEO Brian Niccol in order to tackle its struggling performance. The company has experienced two consecutive quarters of negative SSS. Likewise, LSEG is forecasting another negative comp for the current quarter; Starbucks has a -2.7% SSS estimate for the quarter ending September 2024.

Here are the Q2 2024 earnings and same store sales estimates for the companies reporting this week:

Exhibit 2: Same Store Sales and Earnings Estimates – Q2 2024

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Source: LSEG I/B/E/S

Looking forward this week, Brinker International is on track to report a 7.7% comp, stronger than last year’s 6.6% result. Analysts polled by LSEG are already bullish on the restaurant’s Q2 performance. The consensus for Brinker’s Q2 2024 EPS is $1.72. However, there’s a five-star rated analyst with a very accurate rating that published a Bold Estimate, which is different (in this case higher) than the consensus estimate. The analyst expects Brinker to report EPS of $2.03, well above the mean. This suggests that it’s likely that Brinker will beat earnings and post a positive surprise.

The StarMine SmartEstimate is a weighted average of analyst estimates, with more weight given to more recent estimates and more accurate analysts. Our studies have shown that when the SmartEstimate differs from the consensus (I/B/E/S mean) by more than 2%, the company is likely to post subsequent earnings surprises directionally correct 70% of the time. This percentage difference is referred to as the Predicted Surprise (PS%) (Exhibit 3).

Exhibit 3: Brinker International StarMine SmartEstimate and Predicted Surprise %: Q2 2024

Source: LSEG Workspace

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