Hey Friends,
With the majority of retailers reporting their Q3 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
Revenue: $1.2B, up 14% YoY.
Comparable Sales: Increased 16%.
Margins: Operating income grew 30%, with a 170-bps margin expansion.
Challenges: Higher freight costs and increased inventory levels.
Amazon
Revenue: $158.9B, up 11% YoY.
Segment Growth: AWS sales rose 19%; North America and International segments grew 9% and 12%, respectively.
Net Income: $15.3B, or $1.43/share, up from $9.9B YoY.
Highlights: Launched AI-powered shopping tools and recorded strong Prime Big Deal Days sales.
Best Buy
Revenue: $9.45B, below $9.63B expected.
Earnings: EPS of $1.26, slightly missing estimates.
Sales: Declined 3.2% YoY.
Challenges: Softer sales in September/October, shorter holiday season, and macroeconomic uncertainty.
Chipotle Mexican Grill
Revenue: $2.8B, up 13% YoY.
Comparable Sales: Increased 6%.
Margins: Operating margin rose to 16.9%; restaurant-level margin decreased to 25.5%.
Earnings: Adjusted EPS grew 17.4% to $0.271.
Expansion: Opened 86 new restaurants, including 73 Chipotlane locations.
Dick’s Sporting Goods
Revenue: $3.06B, exceeding expectations.
Comparable Sales: Grew 4.2% YoY, above 2.7% forecasts.
Earnings: EPS of $2.75, beating $2.68 expected.
Outlook: Raised FY2024 same-store sales guidance to 3.6%-4.2%.
Dillard’s
Revenue: $1.43B, down 4% YoY.
Comparable Sales: Declined 4%.
Earnings: Net income fell to $124.6M ($7.73/share) from $9.49 YoY.
Outlook: Focused on maintaining gross margins (44.5%) and controlling expenses.
Kohl’s
Revenue: $3.71B, below $3.84B expected.
Earnings: EPS of $0.20, missing $0.27 estimates.
Performance: Comparable sales dropped 9.3%.
Outlook: Cautious FY guidance amid a competitive holiday season.
Leadership: CEO Tom Kingsbury stepping down in January 2025.
Lowe’s
Earnings: Net income of $1.7B ($2.99/share), down from $3.06/share YoY. Adjusted EPS of $2.89.
Sales: Total sales of $20.2B, down from $20.5B YoY; comparable sales decreased 1.1%.
Outlook: FY2024 sales of $83.0-$83.5B; adjusted EPS at $11.80-$11.90.
Macy’s
Earnings: Q3 net income of $28M (10 cents/share), down from $41M YoY.
Revenue: $4.74B, below $4.78B expected.
Outlook: Adjusted FY EPS lowered to $2.25-$2.50.
Turnaround: Positive trends at 50 investment stores and expanding Bloomingdale’s/Bluemercury.
McDonald’s
Earnings: Adjusted EPS of $3.23, beating $3.20 expectations.
Revenue: Rose 3% YoY to $6.87B.
Challenges: E. coli outbreak linked to onions; global same-store sales fell 1.5%.
U.S. Performance: Same-store sales rose 0.3%, below 0.5% estimates.
Nordstrom
Earnings: Adjusted EPS of 33 cents.
Revenue: $3.46B, beating $3.35B expected.
Sales Growth: Comparable sales rose 4%.
Initiatives: Opened 23 Nordstrom Rack stores in 2024.
Starbucks
Earnings: EPS of $0.80, below $1.03 expected.
Revenue: $9.07B, missing $9.36B forecasts.
Performance: Global same-store sales fell 7%; U.S. sales declined 6%.
Turnaround Strategy: Speedier service, simplified menus, and redesigns.
Target
Earnings: EPS of $1.85, below $2.30 expected.
Revenue: $25.67B, missing $25.90B forecasts.
Performance: Comparable sales grew 0.3%.
Outlook: Lowered FY guidance; added holiday discounts.
TJX
Earnings: EPS of $1.14, above $1.09 expected.
Revenue: $14.06B, exceeding $13.95B forecast.
Performance: Comparable sales rose 2%-7%.
Challenges: Lowered holiday EPS guidance.
Walgreens
Earnings: Adjusted EPS of $0.39, beating $0.36 estimates.
Revenue: $37.55B, above $35.76B expected.
Performance: Sales rose 6%.
Outlook: FY 2025 earnings guided to $1.40-$1.80/share.
Walmart
Earnings: Adjusted EPS of $0.58, above $0.53 expected.
Revenue: $169.59B, beating $167.72B forecast.
Performance: Comparable sales rose 5.3% (Walmart U.S.) and 7% (Sam’s Club).
Outlook: FY sales growth raised to 4.8%-5.1%.
This Week in Retail Analysis
Weakened Consumer Spending and Traffic Trends
Soft Demand: Companies like Starbucks, Target, and Kohl's reported weaker-than-expected sales, with foot traffic and discretionary spending continuing to decline.
Lingering Economic Pressures: Many consumers remain cautious with spending due to persistent high costs for essentials like food and housing.
Discretionary Challenges: Retailers with higher exposure to non-essential categories, such as apparel (Target, Kohl's, TJX), are struggling to grow.
Pricing Strategy and Value Emphasis
Discounts and Price Reductions:
Target cut prices on thousands of items to attract cost-conscious shoppers, but results were underwhelming.
Walmart saw strong growth in general merchandise sales by emphasizing value and offering deals, positioning itself well for the holiday season.
TJX thrived on its off-price model, winning over younger and value-seeking shoppers.
Starbucks Removed Extra Charges: For milk alternatives as part of a broader strategy to win back U.S. customers.
Restructuring and Turnaround Efforts
Cost-Cutting Measures:
Walgreens announced plans to close 1,200 underperforming stores to reduce costs and adapt to shifting consumer behaviors.
Starbucks is redesigning cafes and focusing on operational efficiency (e.g., delivering drinks in under four minutes).
Kohl’s lowered capital expenditure forecasts, focusing on its Sephora partnership and core growth areas.
Leadership Changes:
Starbucks CEO Brian Niccol outlined a turnaround plan after reporting disappointing results in his first quarter.
Kohl’s CEO Tom Kingsbury is stepping down in January 2025.
Holiday and Seasonal Strategy
Early Holiday Push:
Target launched early holiday promotions but still missed expectations.
Walmart is leaning on holiday shopping momentum, supported by discretionary sales growth for the second consecutive quarter.
TJX reported a strong start to holiday sales and emphasized its treasure-hunt shopping experience as a key driver.
Unfavorable Weather: Warm fall weather created challenges for apparel retailers like TJX, which rely on seasonal demand for cold-weather gear.
International Expansion and Competition
Starbucks in China: Struggled with declining same-store sales (-14%) and rising competition from local brands like Luckin Coffee. The CEO plans to spend more time in the region to reassess strategies.
TJX's Global Push: Reported strong international growth, particularly in Europe and Australia, and announced plans to expand into Spain by 2026.
Walgreens: Faces challenges in its international segment but plans to grow healthcare services abroad.
Bright Spots Amid Challenges
Resilient Brands and Segments:
Walmart's success with Sam's Club (7% same-store sales growth) and general merchandise highlights its adaptability.
TJX saw steady gains in customer transactions, with robust international performance and a growing younger demographic base.
Kohl’s Sephora partnership and impulse categories like gifting and home décor outperformed expectations.
Innovation and Efficiency:
Walgreens leveraged AI for supply chain optimization.
Starbucks focused on mobile ordering improvements and streamlined its menu for faster service.
Financial Underperformance and Adjustments
Earnings Misses:
Starbucks, Target, and Kohl’s all reported results that fell short of Wall Street expectations.
These companies also adjusted guidance downward, reflecting caution about future quarters.
Earnings Beats:
TJX and Walgreens beat expectations due to operational efficiency and cost discipline, although guidance remained conservative.
Reduced Forecasts:
Many companies lowered sales and profit guidance for the year, citing ongoing economic uncertainty and competitive holiday conditions.
Overall Trends
Consumers Prioritize Value: Retailers offering deals, essential goods, and seamless experiences (e.g., Walmart, TJX) are outperforming.
Operational Streamlining: Many companies are cutting costs, adjusting store formats, and narrowing focus on core categories to weather economic headwinds.
Leadership and Strategy Shifts: New leaders and restructured strategies reflect a challenging macro environment where adaptability is crucial.
This paints a picture of an industry under pressure, leaning into cost efficiency and value to navigate shifting consumer priorities and economic conditions.