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To date, 135 of the 194 companies in our Retail/Restaurant Index have reported their EPS results for Q3 2024, representing 70% of the index. Of those companies that have reported their quarterly results, 62% announced profits that beat analysts’ expectations, while 5% delivered on-target results and 33% reported earnings that fell below estimates. The Q3 2024 blended earnings growth estimate now stands at 7.1%.

The blended revenue growth estimate for the 194 companies in this index is 3.6% for Q3 2024. 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

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Source: LSEG I/B/E/S

This week in retail

Home Depot (HD) reported better-than-expected Q3 earnings, revenue and same-store sales (SSS) result. The -1.3% SSS is the best showing in seven quarters. During its earnings call, the home improvement retailer said that sales benefited from hurricane-related repairs and favorable weather throughout the quarter.

Due to better-than-expected Q3 results, the retailer raised their guidance and said it now expects sales “to grow approximately 4% and comparable sales are projected to decline by 2.5%.” The company also said that it is seeing improving results through shrink-mitigating initiatives. Still, the home improvement store warned that “the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand.” (Source: Home Depot Q3 2024 Earnings)

Home Depot’s stock is also up 17% for the year. Accordingly, our StarMine data shows that Home Depot ranks in the top quartile on the StarMine Smart Holdings and Short Interest models (Exhibit 2). The retailer scores a notable 86 out of 100 on the Short Interest Model, indicating that investors are not betting against the company. Buy-side analysts are increasingly optimistic about Home Depot, as evidenced by the StarMine Smart Holdings Model, which highlights key investor concerns. Notably, Home Depot’s high return on equity (ROE) and return on assets (ROA) make it a compelling investment choice. The home improvement retailer is profitable and therefore is attractive to the buy side.

Exhibit 2: Home Depot StarMine Model Scores

Source: LSEG Workspace

Next week in retail

Looking forward to next week, Walmart (WMT) is on track to report a 3.9% growth in earnings and 4.3% growth in revenue. The StarMine Analyst Revisions Model predicts future revisions and price movement, with Walmart scoring 81 out of 100, indicating a bullish outlook. In fact, analysts polled by LSEG believe the discounter is likely to beat its earnings estimate and post a positive surprise. It suggests that analysts are bullish on the discounter and have been revising estimates upwards. The StarMine Smart Holdings Model also reflects positive sentiment from buy-side analysts, and Walmart’s scores a 94 out of 100 on the Short Interest Model, suggesting investors are not betting against the company.

Exhibit 3: Walmart StarMine Model Scores

Source: LSEG Workspace

Here are the Q3 2024 earnings and same store sales estimates for the companies reporting this and next week:

Exhibit 4: Same Store Sales and Earnings Estimates – Q3 2024

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Source: LSEG I/B/E/S

October 2024 retail sales forecast

For most retailers, October marks the last month of the fiscal third quarter, covering the three-month period from August through October. Retailers are still warning of a frugal consumer when providing guidance. Accordingly, LSEG IFR Economics is projecting a 0.3% month-over-month decrease in overall U.S. retail sales, suggesting a slight contraction in October compared to September’s 0.2% increase (Exhibit 5).

Exhibit 5: U.S. Retail Sales: 2022 – 2024

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Source: LSEG IFR

U.S. retail sales excluding autos are expected to improve to a 0.3% month-over-month increase, slightly below September’s 0.4% (Exhibit 6). The control group sales are projected to increase by 0.3% month-over-month. All main retail indicators are projected to decelerate from September. Given recent retail earnings trends, it is likely that October sales will see a small pickup from furniture and apparel, but petroleum is likely to continue dampening any modest positive contributions.

Exhibit 6: U.S. Retail Sales: August 2024 Estimates

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Source: LSEG IFR

Guidance

So far, 135 retailers have reported Q3 2024 earnings; of this group, many are still citing elevated prices, macroeconomic conditions and a cautious consumer.

Looking ahead to Q4 2024, 17 retailers issued negative preannouncements, while four issued positive EPS guidance so far (Exhibit 7). Of those retailers offering revenue guidance, 15 warned of disappointing results, while nine said revenue might be better than previously expected.

Exhibit 7: Earnings and Revenue Guidance: Q3 2024

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Source: LSEG I/B/E/S

Discount levels – U.S. online retailers

The discount penetration (how much of the assortment is on sale) has declined in the beginning of November as the holiday season is about to get started on Black Friday. This, in a time when consumers become have become more price conscious and concerned about the economy. LSEG discovered this in a collaboration with Centric Market Intelligence, which analyses retailers, brands, online trends and products across the globe.

Exhibit 8: Average Discount Penetration: U.S. Online Retailers

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Source: Centric Market Intelligence

Similarly, the average percent discount in November has come down, below this year’s average of 35%.

Exhibit 9: Average Discount: U.S. Online Retailers

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Source: Centric Market Intelligence

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