U.S. Retail Earnings Update - Friday, Aug. 16

By Jharonne Martis of Lipper Alpha Insight

Friday, August 16, 2024 12:57 PM EDT

Image Source: Mike Mozart, Flickr

To date, 149 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2024, representing 75% 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 13.2%.

The blended revenue growth estimate for the 199 companies in this index is 3.6% for Q2 2024. Of those companies that have reported their quarterly results so far, 50% announced revenue that exceeded analysts’ expectations and the remaining 50% 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

July saw retail sales rebound after a contraction in June. Today’s report had sales up 1.0% month-over-month, with ex-autos sales at +0.4% m/m (mkt +0.3%, +0.1%). The largest month-over-month growth in sales occurred in motor vehicles and parts dealers — were up 3.6% m/m in July.

Exhibit 2: U.S. Retail Sales: July 2024

Source: LSEG IFR

Based on today’s retail sales results, it is evident that e-commerce is crucial to shoppers. On a year-over-year basis, July e-commerce saw the strongest growth of 6.7% (Exhibit 2). Walmart posted its eighth consecutive quarter of double-digit e-commerce growth at 21.0%. The discounter said during its earnings call that “pickup is growing faster than our in-store or club sales, and delivery is growing even faster than pickup. Delivery, accuracy and speed continue to improve.” (Source: Walmart Q2 2024 Earnings Call).

Likewise, Home Depot’s e-commerce sales also reported a robust 4.0% growth, above expectations of 0.3%. 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.

Walmart had another stellar quarter showing strength across the board, both in the U.S. and internationally. As a result, the discounter beat on earnings, revenue and same store sales and raised its full-year outlook. This week’s results also underline how price conscious the consumer is, and the middle and upper-class consumers continue to trade down. Walmart saw robust food sales which helped drive spending in general merchandise.

Here are the Q1 2024 earnings and same store sales estimates for the companies reporting this week:

Exhibit 3: Same Store Sales and Earnings Estimates – Q2 2024

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Source: LSEG I/B/E/S

Guidance

So far, 149 retailers have reported Q2 2024 earnings; of this group,88 mentioned inflation.

Looking ahead to Q3 2024, 19 retailers issued negative preannouncements, while six issued positive EPS guidance so far (Exhibit 4). Of those retailers offering revenue guidance, 18 warned of disappointing results, while five said revenue might be better than previously expected.

Exhibit 4: Earnings and Revenue Guidance: Q2 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 risen this year, as consumers become more price conscious and concerned about the economy. LSEG discovered this in a collaboration with Centric Market Intelligence, formerly StyleSage, which analyses retailers, brands, online trends and products across the globe.

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

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