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Macy's, Kohl's, Home Depot, Walmart and Target are part of Zacks Earnings Preview

Zacks Equity Research

For Immediate Release

Chicago, IL – November 25, 2019 – releases the list of companies likely to issue earnings surprises. This week’s list includes Macy’s M, Kohl’s KSS, Home Depot HD, Walmart WMT and Target TGT.

Making Sense of Retail Earnings

The picture emerging out of the Q3 earnings season for the traditional brick-and-mortar retailers is at best mixed, with a number of major players like Macy’s, Kohl’s and even Home Depot clearly missing the mark. Many others, including Walmart and Target, have kept the momentum going by coming out with impressive results.

The issues facing traditional retailers are longstanding and deal with the steady shift in consumer spending to the online medium and the associated drop in foot traffic at the physical facility. In response, these players have been rationalizing their physical footprint and investing in integrating the online offering with the physical store. Walmart and Target appear to be quite further along in this transition than others like Macy’s and we saw that in these companies’ Q3 results as well.

For the Retail sector as a whole, where we include the online players and restaurant companies in addition to the aforementioned traditional operators, we now have Q3 results from 32 of the 38 retailers in the S&P 500 index. Total earnings for these companies are up +1.2% on +9.5% higher revenues, with 65.6% beating EPS estimates and 53.1% beating revenue estimates.

This is a weaker showing than we have seen from the group in other recent periods.

The Q3 EPS beats percentage at 65.6% is the fourth lowest of all 16 Zacks sectors (Basic Materials, Energy, and Utilities are the only ones that have an even lower EPS beats percentage) while the revenues beats percentage is in the middle of the 16 sector pack.

S&P 500 Scorecard (as of Friday, November 22nd, 2019)

We now have Q3 results from 477 S&P 500 members or 95.4% of the index’s total membership. Total earnings (or aggregate net income) for these 477 companies are down -1.2% from the same period last year on +4.3% higher revenues, with 73% beating EPS estimates and 57.7% beating revenue estimates.

Looking at Q3 as a whole, combining the actual results from the 477 index members with estimates for the still-to-come companies, total earnings (or aggregate net income) is expected to be down -1.7% from the same period last year on +4.2% higher revenues.

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