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Not Every Retailer is Suffering This Earnings Season

It has been the accepted wisdom for a while that it is only a question of time before Amazon mops up the traditional brick-and-mortar retailer’s every last sales dollar. I am obviously exaggerating here, but we have been seeing the ‘Amazon effect’ in a host of retail sub-industries in recent years.

Many have been thinking that what happened to Barnes & Noble and other booksellers is the fate of most traditional retailers; we certainly have seen the once-mighty operators like Macy’s (M) in the department store space and Wal-Mart (WMT) in the big-box discounter industry humbled in recent years. You can see this in the stock market performance of these players – Amazon shares are up +37.7% in the past year while Macy’s is down -26.7% in that same time period.

Wal-Mart shares have done better – they are up +13% over the past year – largely because market participants have come around lately to see its digital strategy as credible. The retail giant has not only been steadily making investments in its online operations, but also strengthening its legacy through investments in employees and cleaner and more organized floor space. This has started showing up in Wal-Mart’s earnings results, as we saw in the company’s strong Q1 earnings report. But it’s safe to say that Wal-Mart still has a long way to go before it can effectively fend off the Amazon challenge.

One could argue that what has started working for Wal-Mart should work for Macy’s as well. But their brick-and-mortar commonality aside, they are fundamentally different businesses. Wal-Mart may bring in foot traffic through its enormous groceries business, but there is increasingly less reason for consumers to visit Macy’s, other department stores or even the malls. We are seeing this issue with a host of other mall-based retailers as well, which is giving rise to the ‘death of the mall’ narrative. We should be mindful, however, that as weak as the mall-based retail space has been lately, some of these mall-based players have been able to make it work.

Strong results from The Children’s Place (PLCE) and Gap (GPS) prove this point. But for every Children’s Place winner, you have a host of mall-based Foot Locker (FL) losers that are forced to blame everything – from delayed tax refunds and Easter Day placements to the weather – but their inability to respond to changing consumer behavior. On a related note, the Foot Locker disappointment may have read-throughs for Nike (NKE) and Under Armour (UAA) as well.  

Retail Sector Scorecard

As of Friday, May 19th, we now have Q1 results from 33 of the 42 retailers in the S&P 500 index. Total earnings for these 33 retailers are up +1.5% from the same period last year on +2.9% higher revenues, with 63.6% beating EPS estimates and 54.5% 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 restaurant operators.

The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 33 retailers in other recent periods.

The aggregate results from the 33 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 flat, as the right-hand chart below shows.

A few standout results notwithstanding, the sector’s Q1 results have been notably weak in an otherwise strong earnings season. Please note that the proportion of Retail sector companies beating EPS estimates (63.6%) is the third lowest in the entire S&P 500 index, while the proportion of revenue surprises (54.5%) is the fourth lowest of all 16 Zacks sectors.  

Q1 Earnings Scorecard

As of Friday, May 19th, we have Q1 results from 472 S&P 500 members that combined account for 96.9% of the index’s total market capitalization. Total earnings for these companies are up +13.7% from the same period last year on +7.2% higher revenues, with 72.5% beating EPS estimates and 65.7% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.7%.

The table provides the current earnings season scorecard, as of May 19th, 2017.

Comparing Q1 Results

The chart below provides a comparison of the growth performance thus far with what we have seen from this same group of 472 S&P 500 members in other recent periods.

As you can see, the Q1 growth pace is notably tracking above what we had seen from the same group of 472 index members in other recent periods. Importantly, the growth performance is broad-based and not narrowly concentrated. We got the leadership from the Finance space earlier in the reporting cycle, but the baton has since shifted to Tech and host of other areas, including Industrials, Basic Materials, and Energy.

Positive Revenue Surprises

The chart below compares the proportion of positive EPS and revenue surprises in Q1 thus far with what we had seen from the same group of 472 index members in other recent periods.

The proportion of Q1 companies beating EPS estimates is tracking above historical periods, with positive revenue surprises particularly coming out ahead of what we are used to seeing in the recent past. You can see the same in the chart below that compares the proportion of Q1 companies beating both EPS and revenue estimates with other recent periods.

Expectations for Q1 As a Whole

Looking at Q1 as whole, combining the actual results from the 472 S&P 500 members that have come out with estimates for the still-to-come 28 index members, total earnings are expected to be up +13.1% from the same period last year on +6.2% higher revenues. This would follow +7.3% earnings growth in 2016 Q4 on +4.7%.

The table below shows the summary picture for Q1, contrasted with what was actually achieved in Q4.

Please note that the Q1 earnings season follows the strong showing on the earnings front in the preceding reporting cycle. Not only did 2016 Q4 growth reach the highest in two years, but total earnings for the quarter also reached a new quarterly record. The strong Q4 performance came after the first positive earnings growth in 2016 Q3, having declined in each of the preceding 5 quarters. The strong Q1 showing represents a notable acceleration in the growth momentum.

The chart below shows the Q1 earnings growth contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, this growth pace is expected to continue through the rest of the year.

Estimates for the current period (2017 Q2) have come down since the start of the quarter, but the magnitude of negative Q2 revisions still compares favorably with the comparable periods over the last two years.

In other words, Q2 estimates are falling, but they aren’t falling by as much as would typically be expected.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

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Here is a list of the 111 companies including 18 S&P 500 members reporting this week.

Company

Ticker

Current Qtr

Year-Ago Qtr

Last EPS Surprise %

Report Day

Time

BOOZ ALLEN HMLT

BAH

0.43

0.41

-5.0%

Monday

BTO

FERROGLOBE PLC

GSM

-0.09

-0.04

47.1%

Monday

BTO

NAVIOS MARIT LP

NMM

-0.04

0

600.0%

Monday

BTO

CHEETAH MBL-ADR

CMCM

N/A

0.01

-66.7%

Monday

BTO

CHINA ONLINE ED

COE

-0.01

N/A

61.0%

Monday

BTO

DIANA CONTAINER

DCIX

-0.85

-0.64

14.3%

Monday

BTO

YIRENDAI LTD

YRD

0.61

0.34

3133.3%

Monday

BTO

AGILENT TECH

A

0.48

0.44

8.2%

Monday

AMC

NORDSON CORP

NDSN

1.3

1.19

4.9%

Monday

AMC

AMERICAS CAR-MT

CRMT

0.64

0.4

-49.3%

Monday

AMC

QUOTIENT LTD

QTNT

-0.76

-0.41

-89.3%

Monday

AMC

LUXOFT HOLDING

LXFT

0.51

0.46

6.4%

Monday

AMC

TARENA INTL-ADR

TEDU

N/A

-0.01

N/A

Monday

AMC

NETSOL TECH INC

NTWK

-0.01

0.08

-400.0%

Monday

N/A

AUTOZONE INC

AZO

12

10.77

-1.5%

Tuesday

BTO

TOLL BROTHERS

TOL

0.62

0.51

20.0%

Tuesday

BTO

DSW INC CL-A

DSW

0.33

0.4

25.0%

Tuesday

BTO

DIANA SHIPPING

DSX

-0.37

-0.41

5.0%

Tuesday

BTO

CRACKER BARREL

CBRL

1.84

1.82

2.3%

Tuesday

BTO

EVINE LIVE INC

EVLV

-0.05

-0.03

-25.0%

Tuesday

BTO

MOMO INC -ADR

MOMO

0.28

0.03

32.3%

Tuesday

BTO

YINTECH INVSTMT

YIN

N/A

0.44

N/A

Tuesday

BTO

KIRKLANDS INC

KIRK

-0.04

0.06

12.5%

Tuesday

BTO

GAZIT GLOBE LTD

GZT

N/A

-0.11

N/A

Tuesday

BTO

INTUIT INC

INTU

3.65

3.27

16.7%

Tuesday

AMC

TAKE-TWO INTER

TTWO

0.47

0.41

195.8%

Tuesday

AMC

BANCOLOMBIA-ADR

CIB

0.86

0.54

2.3%

Tuesday

AMC

HEICO CORP

HEI

0.5

0.46

0.0%

Tuesday

AMC

AEGEAN MARINE

ANW

0.36

0.24

5.1%

Tuesday

AMC

CONTAINER STORE

TCS

0.09

0.2

-15.4%

Tuesday

AMC

BRISTOW GROUP

BRS

-0.48

0.13

38.3%

Tuesday

AMC

OOMA INC

OOMA

-0.18

-0.22

5.9%

Tuesday

AMC

VIASAT INC

VSAT

0.01

0.12

100.0%

Tuesday

AMC

ASCENDIS PHARMA

ASND

-0.64

-0.9

9.8%

Tuesday

AMC

TILLYS INC

TLYS

-0.1

-0.06

4.8%

Tuesday

AMC

LOWES COS

LOW

1.07

0.87

8.9%

Wednesday

BTO

TIFFANY & CO

TIF

0.7

0.64

5.8%

Wednesday

BTO

ADVANCE AUTO PT

AAP

2.13

2.51

-8.3%

Wednesday

BTO

DYCOM INDS

DY

1.2

1.08

18.8%

Wednesday

BTO

GOLDEN OCEAN GP

GOGL

-0.14

-0.65

146.2%

Wednesday

BTO

KLX INC

KLXI

0.3

0.37

63.0%

Wednesday

BTO

SEADRILL LTD

SDRL

-0.05

0.26

84.6%

Wednesday

BTO

HOEGH LNG PTNRS

HMLP

0.41

0.29

-19.4%

Wednesday

BTO

THERMON GROUP

THR

0.14

0.2

0.0%

Wednesday

BTO

NAVIOS MARI HLD

NM

-0.28

-0.11

-16.7%

Wednesday

BTO

JA SOLAR HOLDGS

JASO

-0.02

0.36

1500.0%

Wednesday

BTO

SEADRILL PTNRS

SDLP

0.32

0.48

38.0%

Wednesday

BTO

WESTELL TECH-A

WSTL

0

-0.05

100.0%

Wednesday

BTO

CHICOS FAS INC

CHS

0.29

0.25

150.0%

Wednesday

BTO

EATON VANCE

EV

0.59

0.48

-8.6%

Wednesday

BTO

TRIUMPH GRP INC

TGI

1.6

1.32

-18.6%

Wednesday

BTO

CSRA INC

CSRA

0.46

0.5

6.7%

Wednesday

AMC

NETAPP INC

NTAP

0.68

0.36

22.0%

Wednesday

AMC

PVH CORP

PVH

1.6

1.5

0.8%

Wednesday

AMC

HP INC

HPQ

0.39

0.41

2.7%

Wednesday

AMC

COPART INC

CPRT

0.36

0.32

0.0%

Wednesday

AMC

STAR BULK CARRS

SBLK

-0.22

-0.88

-50.0%

Wednesday

AMC

EPLUS INC

PLUS

0.79

0.73

17.2%

Wednesday

AMC

WILLIAMS-SONOMA

WSM

0.48

0.53

3.3%

Wednesday

AMC

PURE STORAGE

PSTG

-0.38

-0.34

12.5%

Wednesday

AMC

SPARTAN NASH CO

SPTN

0.53

0.54

8.2%

Wednesday

AMC

EXA CORP

EXA

-0.23

-0.05

160.0%

Wednesday

AMC

FORTUNA SILVER

FSM

0.1

0.02

-25.0%

Wednesday

AMC

GUESS INC

GES

-0.31

-0.23

-2.4%

Wednesday

AMC

MODINE MANUFACT

MOD

0.34

0.36

-12.5%

Wednesday

AMC

SHOE CARNIVAL

SCVL

0.53

0.56

75.0%

Wednesday

AMC

VEDANTA RES PLC

VDNRF

N/A

N/A

N/A

Wednesday

N/A

BANK MONTREAL

BMO

1.41

1.31

23.0%

Wednesday

N/A

BEST BUY

BBY

0.4

0.44

17.5%

Thursday

BTO

MEDTRONIC

MDT

1.31

1.27

0.9%

Thursday

BTO

DOLLAR TREE INC

DLTR

0.99

0.89

4.5%

Thursday

BTO

HORMEL FOODS CP

HRL

0.4

0.4

-4.4%

Thursday

BTO

PATTERSON COS

PDCO

0.64

0.77

1.8%

Thursday

BTO

SIGNET JEWELERS

SIG

1.67

1.95

0.8%

Thursday

BTO

BURLINGTON STRS

BURL

0.7

0.57

4.7%

Thursday

BTO

BRADY CORP CL A

BRC

0.43

0.42

17.7%

Thursday

BTO

BIOLINE RX LTD

BLRX

-0.05

-0.1

-62.5%

Thursday

BTO

ABERCROMBIE

ANF

-0.72

-0.59

-6.6%

Thursday

BTO

GENESCO INC

GCO

0.34

0.62

20.1%

Thursday

BTO

INTL GAME NEW

IGT

0.47

0.57

87.2%

Thursday

BTO

TITAN MACHINERY

TITN

-0.13

-0.21

-63.2%

Thursday

BTO

CDN IMPL BK

CM

1.89

1.81

1.9%

Thursday

BTO

MIX TELEMATICS

MIXT

0.04

0.06

71.4%

Thursday

BTO

SANDERSON FARMS

SAFM

2.75

2.11

-12.1%

Thursday

BTO

TORO CO

TTC

1.03

0.94

10.8%

Thursday

BTO

CHRISTOPHER&BNK

CBK

-0.12

0

-2.2%

Thursday

BTO

NOMAD FOODS LTD

NOMD

0.26

0.31

N/A

Thursday

BTO

NGL ENERGY PART

NGL

0.09

0.75

-117.5%

Thursday

BTO

ROYAL BANK CDA

RY

1.32

1.21

5.3%

Thursday

BTO

HANWHA Q CELLS

HQCL

-0.13

0.33

-720.0%

Thursday

BTO

MOVADO GRP INC

MOV

0.13

0.19

0.0%

Thursday

BTO

ADV DRAINAG SYS

WMS

-0.08

-0.13

0.0%

Thursday

BTO

ULTA BEAUTY INC

ULTA

1.79

1.45

5.2%

Thursday

AMC

COSTCO WHOLE CP

COST

1.31

1.24

-13.3%

Thursday

AMC

DECKERS OUTDOOR

DECK

-0.06

0.11

-3.1%

Thursday

AMC

MARVELL TECH GP

MRVL

0.16

-0.04

38.5%

Thursday

AMC

ZOES KITCHEN

ZOES

0.01

0.06

-16.7%

Thursday

AMC

SPLUNK INC

SPLK

-0.75

-0.72

26.3%

Thursday

AMC

CALERES INC

CAL

0.39

0.41

-17.5%

Thursday

AMC

VEEVA SYSTEMS-A

VEEV

0.12

0.11

36.4%

Thursday

AMC

QAD INC-A

QADA

-0.13

-0.14

0.0%

Thursday

AMC

BROCADE COMM SY

BRCD

0.01

0.18

-65.0%

Thursday

AMC

GRIDSUM HOLDING

GSUM

-0.18

N/A

-288.9%

Thursday

AMC

NUTANIX INC-A

NTNX

-0.86

N/A

23.2%

Thursday

AMC

21VIANET GP-ADR

VNET

-0.1

-0.19

-16.7%

Thursday

AMC

8X8 INC

EGHT

-0.03

-0.03

0.0%

Thursday

AMC

GAMESTOP CORP

GME

0.49

0.66

3.9%

Thursday

AMC

LIONS GATE ETMT

LGF.A

0.33

0.26

10.0%

Thursday

AMC

TORONTO DOM BNK

TD

0.92

0.9

4.2%

Thursday

N/A

BIG LOTS INC

BIG

1

0.82

1.4%

Friday

BTO

DRAGONWAVE INC

DRWI

-0.62

-2.98

-111.8%

Friday

AMC


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