What's in Store for Retail Earnings? So Far, a Mixed Bag
Margin pressure and market share risk keep us away from the sector, but the numbers and call comments can hint at expectations for our other holdings.
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Retail earnings continue to pour in, and it appears the mixed bag we got last week with earnings from Walmart WMT and Target TGT continues.
Abercrombie & Fitch ANF and Dick’s Sporting Goods DKS, for example, delivered quarterly results that beat expectations. They also gave guidance for the current quarter that matched top-line forecasts. But Best Buy BBY came up short for both the October quarter and with its outlook for the current one. Kohl’s KSS also came up short with its latest quarterly results and its revamped outlook for 2024 calls for further weakness ahead. Net sales for 2024 are now expected to be down 7%-8% compared with the prior guidance for a 4%-6% decline and earning per share for the year is now targeted between $1.20-$1.50, down from $1.75-$2.25 and the $1.80 market consensus.
Each of these companies will be holding earnings calls this morning. As we discussed in yesterday’s video, we’ll be interested in their comments about discounts, sales, and other promotional activity. Our focus will be on efforts to win shoppers, the potential impact on margins, and the likelihood of even greater discounting to clear out any excess post-holiday inventories.
We’ve seen that before, and it tends not to be pretty. It also doesn’t fit with our focus on companies benefiting from pronounced tailwinds and poised to deliver superior EPS growth over the coming quarters. Based on what we continue to see, it looks like a bifurcated holiday shopping season and in that environment, we continue to favor our Amazon AMZN and Costco COST shares.
With Best Buy in particular, we’ll be interested in comments between large ticket items, such as appliances, as well as those for TVs, smartphones, and PC sales, given our positions in Universal Display OLED, Apple AAPL, Qualcomm QCOM, and Microsoft MSFT. We would not be surprised to see Best Buy reiterate the hopeful comments issued by AT&T T and Verizon VZ about forthcoming iOS updates for iPhone that include more Apple Intelligence features. Ahead of quarterly results after today’s market close from HP HPQ and Dell DELL, we’ll be very interested in Best Buy’s comments about AI PCs and how they see their offering shaping up over the coming quarters.
At the time of publication, the Pro Portfolio was long AAPL, AMZN, COST, OLED, QCOM, MSFT.
