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J.C. Penney, Macy's, Wal-Mart, Target and Home Depot are part of Zacks Earnings Preview

Zacks Equity Research

For Immediate Release

Chicago, IL – May 15, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes J.C. Penney (NYSE: JCP – Free Report ), Macy’s (NYSE: M – Free Report ), Wal-Mart (NYSE: WMT – Free Report ), Target (NYSE: TGT – Free Report ) and Home Depot (NYSE: HD – Free Report ).

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Retail Sector's Disappointing Earnings Results

The earnings focus lately has been on the Retail sector, withJ.C. Penney (NYSE: JCP – Free Report ) becoming the latest department store to follow the lead set byMacy’s (NYSE: M – Free Report ) and others. These reports reconfirm what we have known for a while – that these operators needed literally to reinvent their businesses to effectively operate in an environment where consumers are steadily shifting their spending dollars to the online medium instead of visiting the physical store.

Macy’s results were particularly disappointing as it not only came out with a bigger than expected decline in same-store sales but also missed consensus EPS and revenue estimates. Kohl’s did better with respect to EPS and revenue results, on the back of disciplined inventory management and help from the inclusion of Under Armour merchandise, but same-store sales missed the mark at Kohl’s as well. The others are in the same boat. The core problem for these operators remains the steadily falling foot traffic as a result of sales moving to the online channel, which is making the group’s excessive store capacity ever more problematic.

Retail Sector Scorecard

As of Friday, May 12th, we now have Q1 results from 24 of the 42 retailers in the S&P 500 index. Total earnings for these 24 retailers are up +2.2% from the same period last year on +4.6% higher revenues, with 58.3% beating EPS estimates and 54.2% 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 Priceline and restaurant operators. Most of the 24 Zacks Retail sector companies that have reported Q1 results already at this stage are online vendors and restaurant players, with the traditional retail operators starting the reporting process with Thursday’s Macy’s disappointment that was maintained by Nordstrom after the market’s close on Thursday and JC Penney Friday morning.

The aggregate results from the 24 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 modestly in the negative.

We will get Retail’s complete picture following this week’s results fromWal-Mart (NYSE: WMT – Free Report ), Target (NYSE: TGT – Free Report ) and Home Depot (NYSE: HD – Free Report ), but the sector’s Q1 results thus far are notably weak in an otherwise strong earnings season. Please note that the proportion of Retail sector companies beating EPS estimates (58.3%) is the second lowest in the entire S&P 500 index, while the proportion of revenue surprises (54.2%) is the fourth lowest of all 16 Zacks sectors.

Q1 Earnings Scorecard

As of Friday, May 12th, we have Q1 results from 454 S&P 500 members that combined account for 92.5% of the index’s total market capitalization. Total earnings for these companies are up +13.9% from the same period last year on +7.9% higher revenues, with 72.2% beating EPS estimates and 66.1% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.8%.

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J.C. Penney Company, Inc. Holding Company (JCP): Free Stock Analysis Report
Macy's Inc (M): Free Stock Analysis Report
Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report
Target Corporation (TGT): Free Stock Analysis Report
Home Depot, Inc. (The) (HD): Free Stock Analysis Report
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