Image Source: Unsplash

To date, 179 of the 197 companies in our Retail/Restaurant Index have reported their EPS results for Q1 2025, representing 91% of the index. Of those companies that have reported their quarterly results, 65% announced profits that beat analysts’ expectations, while 3% delivered on-target results and 32% reported earnings that fell below estimates. The Q1 2025 blended earnings growth estimate now stands at 7.2%.

The blended revenue growth estimate for the 197 companies in this index is 2.9% for Q1 2025. Of those companies that have reported their quarterly results so far, 53% announced revenue that exceeded analysts’ expectations and the remaining 47% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard

(Click on image to enlarge)

Source: LSEG I/B/E/S

This week in retail

This week, both Dollar Tree DLTR and Dollar General DG reported stronger than expected first-quarter earnings, revenue and same store sales (SSS), underscoring the resilience of the discount retail sector during periods of macro-economic uncertainty. The discounters are receiving a boost from middle and high-end consumers hunting for values. Dollar General posted a 7.9% earnings growth after eight straight quarters of earnings decline, and a robust 5.4% SSS. The company saw a 1.9% increase in foot traffic and is investing in store remodels, wage increases, and expanded e-commerce efforts. Partnerships with platforms such as DoorDash DASH, and celebrity collaborations, including Dolly Parton, have also contributed to growth.

Similarly, Dollar Tree reported a 1.7% SSS, driven by a 2.8% rise in customer traffic, though average transaction value declined slightly. The company is focusing on expanding its “Dollar Tree 3.0” format and plans to sell its Family Dollar segment. Despite these positive results, both dollar stores’ stock fell with the announcements of potential profit declines due to tariffs.

Both retailers are navigating challenges such as inflation and shifting consumer behavior, yet their strategic investments and adaptations position them for continued growth in the evolving retail landscape.

Looking ahead, analysts polled by LSEG are already bullish on Dave & Buster’s Q1 performance. The consensus for the company’s Q1 2025 EPS is $1.02. 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 Dave & Buster’s to report EPS of $1.21, above the mean. This suggests that it’s likely that the company 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 2).

Exhibit 2: Dave & Buster’s Inc. StarMine SmartEstimate and Predicted Surprise %: Q1 2025

Source: LSEG Workspace

Guidance

So far, 179 retailers have reported Q1 2025 earnings; of this group, many have cited higher prices, challenging macroeconomic conditions and a cautious consumer as contributing factors. About 88% of retailers have also discussed the impact of tariffs.

Looking forward to Q2 2025, 24 retailers issued negative preannouncements, while five issued positive EPS guidance for Q2 2025 so far (Exhibit 3). Of those retailers offering revenue guidance, 26 warned of disappointing results, while eight said revenue might be better than previously expected.

Exhibit 3: Earnings and Revenue Guidance: Q1 2025 – Q2 2025

(Click on image to enlarge)

Source: LSEG I/B/E/S

The LSEG Retail/Restaurant Index is now projecting a 7.2% blended earnings growth for Q1 2025, but this is expected to decline to -1.7% in Q2 2025, its first negative showing since the pandemic, underscoring a slowdown in consumer spending (Exhibit 4). This is in line with LSEG/Ipsos Primary Consumer Sentiment Index, which finds that overall American consumer sentiment has declined for three consecutive months. The latest drop in consumer sentiment is driven by a sharp decline in purchasing comfort and the continued decline in current views of jobs market. Previously, much of the unease shown by consumers was rooted in fears about the future of the economy. However, consumers are now more pessimistic about their current situation. American consumer confidence continues to demonstrate the broader economic uncertainty the public feels today.

Exhibit 4: The LSEG Retail Earnings Growth Rate – Q4 2024 – Q4 2025 Est.

(Click on image to enlarge)

Source: LSEG I/B/E/S

Discount levels – U.S. online retailers

The discount penetration (how much of the assortment is on sale) has dropped below 30% – 35% range that has prevailed over the past decade. LSEG discovered this in a collaboration with Centric Market Intelligence, which analyzes retailers, brands, online trends and products across the globe. It comes at a time when retailers are facing increasingly value-conscious consumers.

Exhibit 5: Average Discount Penetration: U.S. Online Retailers

(Click on image to enlarge)

Source: Centric Market Intelligence

Accordingly, the average percent discount dropped to the lowest level this year in May and now stands at 35% for June.

Exhibit 6: Average Discount: U.S. Online Retailers

(Click on image to enlarge)

Source: Centric Market Intelligence

More By This Author:

Why Are Active ETFs Accused Of Misleading Investors?
Will European Stocks Eat The U.S. For Breakfast?
U.S. Equity – Rally Or Rotation? Tech Leads, But For How Long?