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Not Every Retailer is Suffering This Earnings Season
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It has been the accepted wisdom for a while that it is only a question of time before Amazon mops up the traditional brick-and-mortar retailer’s every last sales dollar. I am obviously exaggerating here, but we have been seeing the ‘Amazon effect’ in a host of retail sub-industries in recent years.
Many have been thinking that what happened to Barnes & Noble and other booksellers is the fate of most traditional retailers; we certainly have seen the once-mighty operators like Macy’s (M - Free Report) in the department store space and Wal-Mart (WMT - Free Report) in the big-box discounter industry humbled in recent years. You can see this in the stock market performance of these players – Amazon shares are up +37.7% in the past year while Macy’s is down -26.7% in that same time period.
Wal-Mart shares have done better – they are up +13% over the past year – largely because market participants have come around lately to see its digital strategy as credible. The retail giant has not only been steadily making investments in its online operations, but also strengthening its legacy through investments in employees and cleaner and more organized floor space. This has started showing up in Wal-Mart’s earnings results, as we saw in the company’s strong Q1 earnings report. But it’s safe to say that Wal-Mart still has a long way to go before it can effectively fend off the Amazon challenge.
One could argue that what has started working for Wal-Mart should work for Macy’s as well. But their brick-and-mortar commonality aside, they are fundamentally different businesses. Wal-Mart may bring in foot traffic through its enormous groceries business, but there is increasingly less reason for consumers to visit Macy’s, other department stores or even the malls. We are seeing this issue with a host of other mall-based retailers as well, which is giving rise to the ‘death of the mall’ narrative. We should be mindful, however, that as weak as the mall-based retail space has been lately, some of these mall-based players have been able to make it work.
Strong results from The Children’s Place (PLCE - Free Report) and Gap prove this point. But for every Children’s Place winner, you have a host of mall-based Foot Locker (FL - Free Report) losers that are forced to blame everything – from delayed tax refunds and Easter Day placements to the weather – but their inability to respond to changing consumer behavior. On a related note, the Foot Locker disappointment may have read-throughs for Nike (NKE - Free Report) and Under Armour (UAA - Free Report) as well.
Retail Sector Scorecard
As of Friday, May 19th, we now have Q1 results from 33 of the 42 retailers in the S&P 500 index. Total earnings for these 33 retailers are up +1.5% from the same period last year on +2.9% higher revenues, with 63.6% beating EPS estimates and 54.5% beating revenue estimates.
Please note that we have a stand-alone Retail sector, unlike the official Standard & Poor’s placement of this space in the Consumer Discretionary sector. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar retailers, the online vendors like Amazon and restaurant operators.
The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 33 retailers in other recent periods.
The aggregate results from the 33 retailers that have reported Q1 results already are tracking below what we had seen from the same companies in other recent periods. This is despite the +41.1% growth in Amazon’s earnings on +22.6% higher revenues. On an ex-Amazon basis, the sector’s Q1 earnings growth would be flat, as the right-hand chart below shows.
A few standout results notwithstanding, the sector’s Q1 results have been notably weak in an otherwise strong earnings season. Please note that the proportion of Retail sector companies beating EPS estimates (63.6%) is the third lowest in the entire S&P 500 index, while the proportion of revenue surprises (54.5%) is the fourth lowest of all 16 Zacks sectors.
Q1 Earnings Scorecard
As of Friday, May 19th, we have Q1 results from 472 S&P 500 members that combined account for 96.9% of the index’s total market capitalization. Total earnings for these companies are up +13.7% from the same period last year on +7.2% higher revenues, with 72.5% beating EPS estimates and 65.7% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.7%.
The table provides the current earnings season scorecard, as of May 19th, 2017.
Comparing Q1 Results
The chart below provides a comparison of the growth performance thus far with what we have seen from this same group of 472 S&P 500 members in other recent periods.
As you can see, the Q1 growth pace is notably tracking above what we had seen from the same group of 472 index members in other recent periods. Importantly, the growth performance is broad-based and not narrowly concentrated. We got the leadership from the Finance space earlier in the reporting cycle, but the baton has since shifted to Tech and host of other areas, including Industrials, Basic Materials, and Energy.
Positive Revenue Surprises
The chart below compares the proportion of positive EPS and revenue surprises in Q1 thus far with what we had seen from the same group of 472 index members in other recent periods.
The proportion of Q1 companies beating EPS estimates is tracking above historical periods, with positive revenue surprises particularly coming out ahead of what we are used to seeing in the recent past. You can see the same in the chart below that compares the proportion of Q1 companies beating both EPS and revenue estimates with other recent periods.
Expectations for Q1 As a Whole
Looking at Q1 as whole, combining the actual results from the 472 S&P 500 members that have come out with estimates for the still-to-come 28 index members, total earnings are expected to be up +13.1% from the same period last year on +6.2% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%.
The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4.
Please note that the Q1 earnings season follows the strong showing on the earnings front in the preceding reporting cycle. Not only did 2016 Q4 growth reach the highest in two years, but total earnings for the quarter also reached a new quarterly record. The strong Q4 performance came after the first positive earnings growth in 2016 Q3, having declined in each of the preceding 5 quarters. The strong Q1 showing represents a notable acceleration in the growth momentum.
The chart below shows the Q1 earnings growth contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, this growth pace is expected to continue through the rest of the year.
Estimates for the current period (2017 Q2) have come down since the start of the quarter, but the magnitude of negative Q2 revisions still compares favorably with the comparable periods over the last two years.
In other words, Q2 estimates are falling, but they aren’t falling by as much as would typically be expected.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
The Best Place to Start Your Stock Search
Today, you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
Here is a list of the 111 companies including 18 S&P 500 members reporting this week.
Company
Ticker
Current Qtr
Year-Ago Qtr
Last EPS Surprise %
Report Day
Time
BOOZ ALLEN HMLT
BAH
0.43
0.41
-5.00%
Monday
BTO
FERROGLOBE PLC
GSM
-0.09
-0.04
47.06%
Monday
BTO
NAVIOS MARIT LP
NMM
-0.04
0
600.00%
Monday
BTO
CHEETAH MBL-ADR
CMCM
N/A
0.01
-66.67%
Monday
BTO
CHINA ONLINE ED
COE
-0.01
N/A
61.02%
Monday
BTO
DIANA CONTAINER
DCIX
-0.85
-0.64
14.29%
Monday
BTO
YIRENDAI LTD
YRD
0.61
0.34
3133.33%
Monday
BTO
AGILENT TECH
A
0.48
0.44
8.16%
Monday
AMC
NORDSON CORP
NDSN
1.3
1.19
4.88%
Monday
AMC
AMERICAS CAR-MT
CRMT
0.64
0.4
-49.28%
Monday
AMC
QUOTIENT LTD
QTNT
-0.76
-0.41
-89.29%
Monday
AMC
LUXOFT HOLDING
LXFT
0.51
0.46
6.35%
Monday
AMC
TARENA INTL-ADR
TEDU
N/A
-0.01
N/A
Monday
AMC
NETSOL TECH INC
NTWK
-0.01
0.08
-400.00%
Monday
N/A
AUTOZONE INC
AZO
12
10.77
-1.46%
Tuesday
BTO
TOLL BROTHERS
TOL
0.62
0.51
20.00%
Tuesday
BTO
DSW INC CL-A
DSW
0.33
0.4
25.00%
Tuesday
BTO
DIANA SHIPPING
DSX
-0.37
-0.41
5.00%
Tuesday
BTO
CRACKER BARREL
CBRL
1.84
1.82
2.34%
Tuesday
BTO
EVINE LIVE INC
EVLV
-0.05
-0.03
-25.00%
Tuesday
BTO
MOMO INC -ADR
MOMO
0.28
0.03
32.26%
Tuesday
BTO
YINTECH INVSTMT
YIN
N/A
0.44
N/A
Tuesday
BTO
KIRKLANDS INC
KIRK
-0.04
0.06
12.50%
Tuesday
BTO
GAZIT GLOBE LTD
GZT
N/A
-0.11
N/A
Tuesday
BTO
INTUIT INC
INTU
3.65
3.27
16.67%
Tuesday
AMC
TAKE-TWO INTER
TTWO
0.47
0.41
195.83%
Tuesday
AMC
BANCOLOMBIA-ADR
CIB
0.86
0.54
2.33%
Tuesday
AMC
HEICO CORP
HEI
0.5
0.46
0.00%
Tuesday
AMC
AEGEAN MARINE
ANW
0.36
0.24
5.13%
Tuesday
AMC
CONTAINER STORE
TCS
0.09
0.2
-15.38%
Tuesday
AMC
BRISTOW GROUP
BRS
-0.48
0.13
38.30%
Tuesday
AMC
OOMA INC
OOMA
-0.18
-0.22
5.88%
Tuesday
AMC
VIASAT INC
VSAT
0.01
0.12
100.00%
Tuesday
AMC
ASCENDIS PHARMA
ASND
-0.64
-0.9
9.84%
Tuesday
AMC
TILLYS INC
TLYS
-0.1
-0.06
4.76%
Tuesday
AMC
LOWES COS
LOW
1.07
0.87
8.86%
Wednesday
BTO
TIFFANY & CO
TIF
0.7
0.64
5.84%
Wednesday
BTO
ADVANCE AUTO PT
AAP
2.13
2.51
-8.26%
Wednesday
BTO
DYCOM INDS
DY
1.2
1.08
18.84%
Wednesday
BTO
GOLDEN OCEAN GP
GOGL
-0.14
-0.65
146.15%
Wednesday
BTO
KLX INC
KLXI
0.3
0.37
62.96%
Wednesday
BTO
SEADRILL LTD
SDRL
-0.05
0.26
84.62%
Wednesday
BTO
HOEGH LNG PTNRS
HMLP
0.41
0.29
-19.35%
Wednesday
BTO
THERMON GROUP
THR
0.14
0.2
0.00%
Wednesday
BTO
NAVIOS MARI HLD
NM
-0.28
-0.11
-16.67%
Wednesday
BTO
JA SOLAR HOLDGS
JASO
-0.02
0.36
1500.00%
Wednesday
BTO
SEADRILL PTNRS
SDLP
0.32
0.48
38.00%
Wednesday
BTO
WESTELL TECH-A
WSTL
0
-0.05
100.00%
Wednesday
BTO
CHICOS FAS INC
CHS
0.29
0.25
150.00%
Wednesday
BTO
EATON VANCE
EV
0.59
0.48
-8.62%
Wednesday
BTO
TRIUMPH GRP INC
TGI
1.6
1.32
-18.55%
Wednesday
BTO
CSRA INC
CSRA
0.46
0.5
6.67%
Wednesday
AMC
NETAPP INC
NTAP
0.68
0.36
22.03%
Wednesday
AMC
PVH CORP
PVH
1.6
1.5
0.82%
Wednesday
AMC
HP INC
HPQ
0.39
0.41
2.70%
Wednesday
AMC
COPART INC
CPRT
0.36
0.32
0.00%
Wednesday
AMC
STAR BULK CARRS
SBLK
-0.22
-0.88
-50.00%
Wednesday
AMC
EPLUS INC
PLUS
0.79
0.73
17.18%
Wednesday
AMC
WILLIAMS-SONOMA
WSM
0.48
0.53
3.33%
Wednesday
AMC
PURE STORAGE
PSTG
-0.38
-0.34
12.50%
Wednesday
AMC
SPARTAN NASH CO
SPTN
0.53
0.54
8.16%
Wednesday
AMC
EXA CORP
EXA
-0.23
-0.05
160.00%
Wednesday
AMC
FORTUNA SILVER
FSM
0.1
0.02
-25.00%
Wednesday
AMC
GUESS INC
GES
-0.31
-0.23
-2.38%
Wednesday
AMC
MODINE MANUFACT
MOD
0.34
0.36
-12.50%
Wednesday
AMC
SHOE CARNIVAL
SCVL
0.53
0.56
75.00%
Wednesday
AMC
VEDANTA RES PLC
VDNRF
N/A
N/A
N/A
Wednesday
N/A
BANK MONTREAL
BMO
1.41
1.31
23.02%
Wednesday
N/A
BEST BUY
BBY
0.4
0.44
17.47%
Thursday
BTO
MEDTRONIC
MDT
1.31
1.27
0.90%
Thursday
BTO
DOLLAR TREE INC
DLTR
0.99
0.89
4.51%
Thursday
BTO
HORMEL FOODS CP
HRL
0.4
0.4
-4.35%
Thursday
BTO
PATTERSON COS
PDCO
0.64
0.77
1.75%
Thursday
BTO
SIGNET JEWELERS
SIG
1.67
1.95
0.75%
Thursday
BTO
BURLINGTON STRS
BURL
0.7
0.57
4.71%
Thursday
BTO
BRADY CORP CL A
BRC
0.43
0.42
17.65%
Thursday
BTO
BIOLINE RX LTD
BLRX
-0.05
-0.1
-62.50%
Thursday
BTO
ABERCROMBIE
ANF
-0.72
-0.59
-6.58%
Thursday
BTO
GENESCO INC
GCO
0.34
0.62
20.11%
Thursday
BTO
INTL GAME NEW
IGT
0.47
0.57
87.23%
Thursday
BTO
TITAN MACHINERY
TITN
-0.13
-0.21
-63.16%
Thursday
BTO
CDN IMPL BK
CM
1.89
1.81
1.88%
Thursday
BTO
MIX TELEMATICS
MIXT
0.04
0.06
71.43%
Thursday
BTO
SANDERSON FARMS
SAFM
2.75
2.11
-12.07%
Thursday
BTO
TORO CO
TTC
1.03
0.94
10.81%
Thursday
BTO
CHRISTOPHER&BNK
CBK
-0.12
0
-2.22%
Thursday
BTO
NOMAD FOODS LTD
NOMD
0.26
0.31
N/A
Thursday
BTO
NGL ENERGY PART
NGL
0.09
0.75
-117.50%
Thursday
BTO
ROYAL BANK CDA
RY
1.32
1.21
5.26%
Thursday
BTO
HANWHA Q CELLS
HQCL
-0.13
0.33
-720.00%
Thursday
BTO
MOVADO GRP INC
MOV
0.13
0.19
0.00%
Thursday
BTO
ADV DRAINAG SYS
WMS
-0.08
-0.13
0.00%
Thursday
BTO
ULTA BEAUTY INC
ULTA
1.79
1.45
5.16%
Thursday
AMC
COSTCO WHOLE CP
COST
1.31
1.24
-13.33%
Thursday
AMC
DECKERS OUTDOOR
DECK
-0.06
0.11
-3.07%
Thursday
AMC
MARVELL TECH GP
MRVL
0.16
-0.04
38.46%
Thursday
AMC
ZOES KITCHEN
ZOES
0.01
0.06
-16.67%
Thursday
AMC
SPLUNK INC
SPLK
-0.75
-0.72
26.32%
Thursday
AMC
CALERES INC
CAL
0.39
0.41
-17.50%
Thursday
AMC
VEEVA SYSTEMS-A
VEEV
0.12
0.11
36.36%
Thursday
AMC
QAD INC-A
QADA
-0.13
-0.14
0.00%
Thursday
AMC
BROCADE COMM SY
BRCD
0.01
0.18
-65.00%
Thursday
AMC
GRIDSUM HOLDING
GSUM
-0.18
N/A
-288.89%
Thursday
AMC
NUTANIX INC-A
NTNX
-0.86
N/A
23.19%
Thursday
AMC
21VIANET GP-ADR
VNET
-0.1
-0.19
-16.67%
Thursday
AMC
8X8 INC
EGHT
-0.03
-0.03
0.00%
Thursday
AMC
GAMESTOP CORP
GME
0.49
0.66
3.93%
Thursday
AMC
LIONS GATE ETMT
LGF.A
0.33
0.26
10.00%
Thursday
AMC
TORONTO DOM BNK
TD
0.92
0.9
4.17%
Thursday
N/A
BIG LOTS INC
BIG
1
0.82
1.35%
Friday
BTO
DRAGONWAVE INC
DRWI
-0.62
-2.98
-111.76%
Friday
AMC
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Not Every Retailer is Suffering This Earnings Season
It has been the accepted wisdom for a while that it is only a question of time before Amazon mops up the traditional brick-and-mortar retailer’s every last sales dollar. I am obviously exaggerating here, but we have been seeing the ‘Amazon effect’ in a host of retail sub-industries in recent years.
Many have been thinking that what happened to Barnes & Noble and other booksellers is the fate of most traditional retailers; we certainly have seen the once-mighty operators like Macy’s (M - Free Report) in the department store space and Wal-Mart (WMT - Free Report) in the big-box discounter industry humbled in recent years. You can see this in the stock market performance of these players – Amazon shares are up +37.7% in the past year while Macy’s is down -26.7% in that same time period.
Wal-Mart shares have done better – they are up +13% over the past year – largely because market participants have come around lately to see its digital strategy as credible. The retail giant has not only been steadily making investments in its online operations, but also strengthening its legacy through investments in employees and cleaner and more organized floor space. This has started showing up in Wal-Mart’s earnings results, as we saw in the company’s strong Q1 earnings report. But it’s safe to say that Wal-Mart still has a long way to go before it can effectively fend off the Amazon challenge.
One could argue that what has started working for Wal-Mart should work for Macy’s as well. But their brick-and-mortar commonality aside, they are fundamentally different businesses. Wal-Mart may bring in foot traffic through its enormous groceries business, but there is increasingly less reason for consumers to visit Macy’s, other department stores or even the malls. We are seeing this issue with a host of other mall-based retailers as well, which is giving rise to the ‘death of the mall’ narrative. We should be mindful, however, that as weak as the mall-based retail space has been lately, some of these mall-based players have been able to make it work.
Strong results from The Children’s Place (PLCE - Free Report) and Gap prove this point. But for every Children’s Place winner, you have a host of mall-based Foot Locker (FL - Free Report) losers that are forced to blame everything – from delayed tax refunds and Easter Day placements to the weather – but their inability to respond to changing consumer behavior. On a related note, the Foot Locker disappointment may have read-throughs for Nike (NKE - Free Report) and Under Armour (UAA - Free Report) as well.
Retail Sector Scorecard
As of Friday, May 19th, we now have Q1 results from 33 of the 42 retailers in the S&P 500 index. Total earnings for these 33 retailers are up +1.5% from the same period last year on +2.9% higher revenues, with 63.6% beating EPS estimates and 54.5% beating revenue estimates.
Please note that we have a stand-alone Retail sector, unlike the official Standard & Poor’s placement of this space in the Consumer Discretionary sector. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar retailers, the online vendors like Amazon and restaurant operators.
The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 33 retailers in other recent periods.
The aggregate results from the 33 retailers that have reported Q1 results already are tracking below what we had seen from the same companies in other recent periods. This is despite the +41.1% growth in Amazon’s earnings on +22.6% higher revenues. On an ex-Amazon basis, the sector’s Q1 earnings growth would be flat, as the right-hand chart below shows.
A few standout results notwithstanding, the sector’s Q1 results have been notably weak in an otherwise strong earnings season. Please note that the proportion of Retail sector companies beating EPS estimates (63.6%) is the third lowest in the entire S&P 500 index, while the proportion of revenue surprises (54.5%) is the fourth lowest of all 16 Zacks sectors.
Q1 Earnings Scorecard
As of Friday, May 19th, we have Q1 results from 472 S&P 500 members that combined account for 96.9% of the index’s total market capitalization. Total earnings for these companies are up +13.7% from the same period last year on +7.2% higher revenues, with 72.5% beating EPS estimates and 65.7% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.7%.
The table provides the current earnings season scorecard, as of May 19th, 2017.
Comparing Q1 Results
The chart below provides a comparison of the growth performance thus far with what we have seen from this same group of 472 S&P 500 members in other recent periods.
As you can see, the Q1 growth pace is notably tracking above what we had seen from the same group of 472 index members in other recent periods. Importantly, the growth performance is broad-based and not narrowly concentrated. We got the leadership from the Finance space earlier in the reporting cycle, but the baton has since shifted to Tech and host of other areas, including Industrials, Basic Materials, and Energy.
Positive Revenue Surprises
The chart below compares the proportion of positive EPS and revenue surprises in Q1 thus far with what we had seen from the same group of 472 index members in other recent periods.
The proportion of Q1 companies beating EPS estimates is tracking above historical periods, with positive revenue surprises particularly coming out ahead of what we are used to seeing in the recent past. You can see the same in the chart below that compares the proportion of Q1 companies beating both EPS and revenue estimates with other recent periods.
Expectations for Q1 As a Whole
Looking at Q1 as whole, combining the actual results from the 472 S&P 500 members that have come out with estimates for the still-to-come 28 index members, total earnings are expected to be up +13.1% from the same period last year on +6.2% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%.
The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4.
Please note that the Q1 earnings season follows the strong showing on the earnings front in the preceding reporting cycle. Not only did 2016 Q4 growth reach the highest in two years, but total earnings for the quarter also reached a new quarterly record. The strong Q4 performance came after the first positive earnings growth in 2016 Q3, having declined in each of the preceding 5 quarters. The strong Q1 showing represents a notable acceleration in the growth momentum.
The chart below shows the Q1 earnings growth contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, this growth pace is expected to continue through the rest of the year.
Estimates for the current period (2017 Q2) have come down since the start of the quarter, but the magnitude of negative Q2 revisions still compares favorably with the comparable periods over the last two years.
In other words, Q2 estimates are falling, but they aren’t falling by as much as would typically be expected.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.
The Best Place to Start Your Stock Search
Today, you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
Here is a list of the 111 companies including 18 S&P 500 members reporting this week.