Hey Friends,
With the majority of retailers reporting their Q2 earnings over the past couple of weeks, I wanted to take the time to summarize the results into a consolidated view. These summaries encapsulate the financial performance and outlooks of major retailers for their respective recent quarters.
Abercrombie & Fitch
• EPS: $2.50 (beat expectations)
• Revenue: $1.13 billion (beat expectations)
• Expectations: EPS of $2.22 and revenue of $1.10 billion.
• Highlights: Strong revenue growth driven by international markets and the Hollister brand. The company issued bullish guidance despite a cautious outlook due to the uncertain economic environment.
Amazon
• EPS: $1.26 (beat expectations)
• Revenue: $147.98 billion (missed expectations)
• Expectations: EPS of $1.03 and revenue of $148.56 billion.
• Highlights: Weak revenue growth due to sluggish retail performance and increasing competition from discount sites like Temu and Shein.
Best Buy
• EPS: $1.34 (beat expectations)
• Revenue: $9.29 billion (beat expectations)
• Expectations: EPS of $1.16 and revenue of $9.24 billion.
• Highlights: Exceeded expectations, driven by stabilizing consumer demand in the tech sector. The company raised its full-year profit guidance.
Chipotle Mexican Grill
• EPS: $0.34 (beat expectations)
• Revenue: $2.97 billion (beat expectations)
• Expectations: EPS of $0.32 and revenue of $2.94 billion.
• Highlights: Continued growth in same-store sales and higher traffic, despite some consumer backlash over portion sizes. The company saw higher traffic at its restaurants, bucking an industry slowdown.
CVS Health
• EPS: $1.83 (beat expectations)
• Revenue: $91.23 billion (missed expectations)
• Expectations: EPS of $1.73 and revenue of $91.5 billion.
• Highlights: Ongoing pressure from higher medical costs led to a reduced full-year profit outlook. The company announced a new cost-cutting plan and leadership changes in its insurance unit.
Dick’s Sporting Goods
• EPS: $4.37 (beat expectations)
• Revenue: $3.47 billion (missed expectations, down 4.9% YoY)
• Expectations: EPS of $3.83 and revenue of $3.44 billion.
• Highlights: comparable sales were driven by both transactions and traffic, the combination of getting people in the door and capturing sales of visitors cited for growth
Dillard’s
• EPS: $4.59 (missed expectations, down 42.5% YoY)
• Revenue: $1.490 billion (missed expectations, down 4.9% YoY)
• Expectations: EPS of $5.91 and revenue of $1.528 billion.
• Highlights: Underperformance attributed to a tough consumer landscape and higher operating expenses, with particular softness in the men’s apparel and accessories category.
Home Depot
• EPS: $4.67 (down 1 cent YoY)
• Revenue: $43.2 billion (up 0.6% YoY)
• Expectations: Not specified.
• Highlights: Higher revenue driven by the acquisition of SRS Distribution, but weaker consumer demand impacted overall results. Comparable sales in the U.S. were down 3.6%.
Lowe’s
• EPS: $4.10 (down 10% YoY)
• Revenue: $23.6 billion (down nearly 6% YoY)
• Expectations: EPS of $3.97 and revenue of $23.9 billion.
• Highlights: Performance was impacted by a slow start to the spring selling season and the hottest June on record. The company also cut its full-year outlook.
Macy’s
• EPS: $0.53 (beat expectations)
• Revenue: $4.94 billion (missed expectations)
• Expectations: EPS of $0.30 and revenue of $5.12 billion.
• Highlights: Strong earnings but lowered full-year sales forecast due to ongoing store closures. The beauty brand Bluemercury was the best-performing segment.
McDonald’s
• EPS: $2.97 (missed expectations)
• Revenue: $6.49 billion (missed expectations)
• Expectations: EPS of $3.07 and revenue of $6.61 billion.
• Highlights: Declining same-store sales globally due to high prices and economic pressures. The company is taking steps to improve value offerings and address customer concerns.
Nordstrom
• EPS: $0.96 (beat expectations)
• Revenue: $3.89 billion (missed expectations)
• Expectations: EPS of $0.71 and revenue of $3.90 billion.
• Highlights: Strong earnings but cautious guidance due to softening demand for luxury goods. The company is focusing on its off-price banner Nordstrom Rack for growth.
Starbucks
• EPS: $0.93 (met expectations)
• Revenue: $9.11 billion (missed expectations)
• Expectations: EPS of $0.93 and revenue of $9.24 billion.
• Highlights: Weaker demand both in the U.S. and international markets, but strong performance in new product launches like the Summer-Berry Refreshers drinks. The company is also seeing increased competition in China.
Target
• EPS: $2.57 (up more than 42% YoY)
• Revenue: $25.5 billion (up nearly 3% YoY)
• Expectations: EPS of $2.19 and revenue of $25.2 billion.
• Highlights: Strong earnings growth driven by improving discretionary sales, especially in apparel. The company repurchased $155 million in shares and raised its full-year earnings-per-share forecast.
TJX Companies
• EPS: $0.96 (beat expectations)
• Revenue: $13.47 billion (beat expectations)
• Expectations: EPS of $0.92 and revenue of $13.31 billion.
• Highlights: Strong performance due to market share gains from competitors and cost efficiencies. The company raised its full-year guidance.
Walgreens
• EPS: $0.63 (missed expectations)
• Revenue: $36.4 billion (beat expectations)
• Expectations: EPS of $0.68 and revenue of $35.94 billion.
• Highlights: The company cited a challenging consumer environment and is focusing on cost-cutting efforts, including closing underperforming stores.
Walmart
• EPS: $0.67 (adjusted)
• Revenue: $169.34 billion
• Expectations: EPS of $0.65 and revenue of $168.63 billion.
• Highlights: General merchandise sales showed positive growth for the first time in 11 quarters, indicating an encouraging trend for the company.
Earnings Analysis Overview
The earnings reports of major retailers reveal a diverse set of challenges and opportunities across the retail landscape. The outcomes highlight variations in consumer demand, seasonal impacts, strategic execution, and sector-specific pressures.
Lowe’s (LOW)
Performance: Lowe's faced a tough quarter with earnings down 10% YoY and revenue declining nearly 6%. This decline was attributed to a slow start to the spring selling season and adverse weather conditions, leading to lower-than-expected sales.
Comparable Store Sales: The 5% drop in comparable-store sales highlights ongoing challenges in the home improvement sector, possibly exacerbated by the quick transition into summer and extreme heat, which might have dampened outdoor project activities.
Outlook: The company’s decision to cut its full-year outlook indicates a cautious stance, reflective of uncertain demand trends.
Target (TGT)
Performance: Target posted strong results with a 42% YoY increase in earnings and revenue up by nearly 3%. The growth was driven by improvements in discretionary sales, especially in apparel, and strategic stock buybacks.
Operating Margins: Target's operating margin improvement to 6.4% is a significant achievement, reflecting effective cost management and strategic product mix.
Outlook: With upwardly revised full-year earnings, Target appears well-positioned to navigate the current retail environment, although ongoing improvements will be necessary to sustain growth.
Home Depot (HD)
Performance: Home Depot reported modest revenue growth of 0.6%, bolstered by the acquisition of SRS Distribution. However, comparable sales were down 3.3%, indicating weaker consumer demand, particularly in the U.S.
Outlook: The company’s warning of weaker demand suggests potential challenges ahead, as higher inflation and economic uncertainty may dampen consumer spending on big-ticket home improvement items.
Walmart (WMT)
Performance: Walmart exceeded earnings expectations but saw a decline in net income due to higher costs. Revenue grew by 4.8% YoY, with general merchandise sales showing positive growth for the first time in 11 quarters.
Outlook: The slight uptick in general merchandise sales is encouraging, but Walmart faces ongoing cost pressures, which may impact profitability in future quarters.
Amazon (AMZN)
Performance: Amazon missed revenue expectations and issued a disappointing forecast for the upcoming quarter. The company continues to struggle with slow growth in its core retail business amidst increasing competition.
AWS and Advertising: Amazon Web Services (AWS) and advertising showed mixed results, with AWS slightly beating expectations, while advertising fell short.
Outlook: Amazon’s cautious forecast and competitive pressures highlight potential headwinds, especially in its core retail segment.
TJX Companies (TJX)
Performance: TJX exceeded both earnings and revenue expectations, supported by strong consumer demand for discounted goods. The company raised its full-year guidance, reflecting confidence in continued market share gains.
Strategy: TJX’s focus on price-sensitive consumers and strategic investments, including its stake in a Dubai-based discounter, position it well for sustained growth.
Macy’s (M)
Performance: Despite beating earnings expectations, Macy’s cut its full-year sales forecast, signaling ongoing challenges in stabilizing its business. The company is in the midst of a significant restructuring, closing stores to streamline operations.
Outlook: The continued success of Bluemercury, Macy's beauty brand, is a bright spot, but the broader business remains under pressure as the company seeks to adapt to changing consumer preferences and retail dynamics.
Dillard's (DDS)
Performance: Dillard’s reported a decline in both sales and earnings, missing estimates and facing challenges in several product categories, notably men's apparel. The company’s gross margin and SG&A expenses also deteriorated.
Outlook: The significant drop in share price following the earnings report reflects investor concerns about the company’s ability to navigate the current retail environment, with rising costs and softer sales.
Abercrombie & Fitch (ANF)
Performance: Abercrombie delivered impressive results, with a 21% increase in revenue and substantial YoY earnings growth. The company’s success was driven by strong sales in its Hollister brand and international markets.
Outlook: Despite the strong quarter, the company issued cautious guidance for the full year, reflecting concerns about the macroeconomic environment. The reduction in its full-year outlook, due to one fewer selling week, could impact future performance.
CVS Health (CVS)
Performance: CVS beat earnings expectations but cut its full-year profit outlook, citing higher medical costs and operational challenges in its health insurance segment. The company’s plan to cut $2 billion in costs aims to offset some of these pressures.
Outlook: The ongoing challenges in CVS’s health insurance division, particularly with rising medical costs, pose a significant risk to future profitability. Leadership changes and strategic adjustments will be critical to stabilizing this segment.
Walgreens:
Earnings Miss & Lowered Guidance: Walgreens' earnings for the fiscal third quarter fell short of expectations, and the company lowered its full-year profit outlook. This reflects the challenging environment for pharmacies and U.S. consumers, with higher prices affecting consumer behavior.
Cost-Cutting Measures: Walgreens is working to reduce costs by closing underperforming stores and simplifying its U.S. healthcare portfolio. The focus on its healthcare segment, which outperformed in the quarter, aligns with its strategy to transition from a drugstore chain to a broader healthcare company.
Stock Impact: The disappointing earnings and lowered guidance led to a significant drop in Walgreens' stock price, highlighting investor concerns about the company's future performance.
Nordstrom:
Earnings Beat but Tepid Guidance: Nordstrom exceeded earnings expectations but provided cautious guidance for the full year. The company is dealing with softening demand for luxury goods, which is affecting its outlook.
Off-Price Strategy: Nordstrom Rack, the company's off-price banner, is playing a critical role in driving growth. Sales at Nordstrom Rack were up, showing that consumers are increasingly looking for cheaper options.
Operational Improvements: Nordstrom is focusing on improving its supply chain and operational efficiencies, which are beginning to yield positive results.
Best Buy:
Earnings Beat & Raised Guidance: Best Buy exceeded earnings and revenue expectations and raised its profit guidance for the fiscal year. However, the company lowered the top end of its revenue and comparable sales guidance.
Turnaround Efforts: Best Buy is in the midst of a turnaround, responding to a two-year sales slump. The company is focusing on key categories like computing and appliances while leveraging new tech products and AI to drive future growth.
Stock Performance: The positive earnings report and raised guidance led to a strong stock performance, with shares jumping significantly.
McDonald's:
Earnings Miss & Global Challenges: McDonald’s reported earnings that missed expectations, with a decline in same-store sales across all major markets. The company is facing challenges from declining traffic and consumer boycotts in some international markets.
Value Strategy: McDonald’s is trying to address the high price perception by leaning into discounts and working with franchisees to improve value offerings. However, the impact on sales is still uncertain.
Stock Impact: The underperformance and earnings miss likely contributed to negative investor sentiment, reflecting concerns about the company's ability to navigate the current economic environment.
Starbucks:
Revenue Miss & Declining Traffic: Starbucks reported weaker-than-expected revenue, with a decline in same-store sales driven by reduced traffic in both U.S. and international markets.
New Product Success: Despite the challenges, Starbucks saw success with new product launches like the Summer-Berry Refreshers and remains optimistic about the impact of upcoming offerings like Pumpkin Spice drinks.
Strategic Partnerships: Starbucks is exploring strategic partnerships to accelerate growth in China, where it faces stiff competition from local coffee shops.
Chipotle:
Earnings Beat & Strong Traffic: Chipotle reported earnings that topped expectations, driven by higher traffic and successful product offerings. The company saw significant growth in same-store sales, despite broader industry challenges.
Operational Focus: Chipotle is focusing on ensuring portion sizes meet customer expectations, which is important for maintaining brand equity. The company is also benefiting from a customer base with higher income levels, which has helped it outperform in a tough market.
Stock Reaction: The strong earnings report led to an initial rise in Chipotle's stock, although it settled lower, reflecting investor caution about the broader restaurant industry's health.
Key Takeaways:
Economic Pressure: Many companies are facing challenges due to higher prices and weakening consumer demand, especially in discretionary spending.
Cost-Cutting & Efficiency: Retailers are increasingly focused on cost-cutting and operational efficiencies to protect profitability.
Strategic Shifts: Companies like Walgreens and Nordstrom are pivoting their business strategies to focus on more resilient segments (healthcare for Walgreens, off-price for Nordstrom) in response to changing consumer behavior.
Product Innovation: New products and strategic adjustments (e.g., Chipotle’s portion control, Starbucks’ new drinks) are critical for maintaining customer engagement and driving sales in a competitive market.