Ahead of handicapping the outlook for the 2022 Q1 period, we want to recap the 2021 Q1 earnings season, with a particular focus on how the Retail sector performed.

Total Retail sector earnings in 2021 Q4 were up +39.9% on +7.5% higher revenues, meaning a strong 140 basis point expansion in net income margins.

With respect to how the group handled inflationary pressures, the picture was generally mixed. Some operators like Target (TGT Quick QuoteTGT - Free Report) and Walmart (WMT Quick QuoteWMT - Free Report) did really well, while others like Home Depot (HD Quick QuoteHD - Free Report) and Lowes (LOW Quick QuoteLOW - Free Report) struggled with these forces. With respect to department stores, the market liked what it saw from Nordstrom , but that was likely more a function of low expectations following the company’s persistent underperformance in recent quarters.

For 2022 Q1, the expectation is for S&P 500 earnings to increase +3.8% on +10.1% higher revenues, implying a compression in net margins.

For more details about the Q1 earnings season and the overall earnings picture, please check out our weekly Earnings Trends report here >>>Pressure on Earnings Estimates: What Sectors Are Most Affected?