Yahoo Finance Live anchors discuss the expectations for retail earnings as consumers ease spending ahead of Black Friday.
JULIE HYMAN: Investors are heading into a busy shortened week of trading with retail earnings on deck, from big names like Best Buy and Dick's Sporting Goods. And obviously, this is something we have been talking a lot about. And if we have been looking at the tea leaves in Target earnings and some of the other numbers, things like Best Buy are not necessarily going to be terribly strong.
BRIAN SOZZI: Like the John Deere trade. The Julie Hyman trade, I'm sorry. The John D? I love John Deere.
JULIE HYMAN: I do love John Deere.
BRAD SMITH: They had a great year last year.
BRIAN SOZZI: They did.
BRAD SMITH: Yeah.
JULIE HYMAN: So I don't think they'll fall. But if we're talking about retail--
BRIAN SOZZI: All right, go on. I'm sorry.
JULIE HYMAN: --specifically, not retail of tractors, then it's a different picture.
BRAD SMITH: And then on the other side, you get into the replenishment side of tractors too. And so perhaps that's an added deflationary signal right now. But when you think about the other retailers right now that we were pointing out, even a Dollar Tree, a Dick's Sporting Goods even, and Best Buy, this is a heavy promotional week. In fact, this is like the Super Bowl of promotion for a lot of them, when you've got Black Friday really kicking off the official sales, at least year over year that consumers have come to expect for decades now.
Even though so much of that promotional timeline has been pulled forward and some of the companies have tried to recognize that in Q3, there's still a lot of the inventory that they have yet to churn through. And that's going to mean a lot more of the promotional scale is really jettisoned higher. And we'll see if consumers really take price on that too, because every single company that we've talked about, they have talked about where they're still continuing to pass through higher prices to consumers.
BRIAN SOZZI: Yeah, this could be another, I think, dreadful week for a lot of retailers. We're just showing a graphic with all the retailers that are set to report. You have Dick's Sporting Goods-- some quick rapid-fire analysis here. Sporting goods sales have been weak. We saw that in latest retail sales report. Best Buy-- electronic sales in retail sales reports have also been weak. Target said, that was one of the weakest areas in their business. So did Walmart and Nordstrom.
I like the Bloomingdale's numbers, outside of Macy's, so that was pretty good. Maybe Nordstrom does a little better than expected-- and Abercrombie and then American Eagle Outfitters. There's a lot of discounting right now in specialty apparel. We heard that from Gap last week. I'm worried about both those quarters.
JULIE HYMAN: You don't think our producers buying all the sweaters at Abercrombie can keep--
BRIAN SOZZI: I do like Abercrombie.
JULIE HYMAN: --can keep their numbers.
BRIAN SOZZI: It's so-- this one's so soft.
JULIE HYMAN: --their numbers afloat.
BRAD SMITH: They're outfitter stores.
JULIE HYMAN: They're very popular. They're very popular in the house here. I was looking at a note from our friend Simeon Siegel over BMO Equity Research about what's going on in retail right now. And he says, what we've been hearing so far is stuff that we've been talking about, right, that we are seeing growing revenues but almost universal, as he put it, gross margin pressures because of the discounting, because of the trying to clear out of inventory.
What's interesting is that he says, we believe investors have been underweight discretionary and are looking to call inflections as supply chain pressures ease and companies speak to working to clear through inventory. So that's a good point that, yes, even if things are bad, at what point do investors step in and say, this is the bottom? This is maybe as bad as it's going to get or near as bad as it's going to get, and we're going to start adding to positions in these stocks. It's just something to watch for.
BRAD SMITH: You know who else this is a critical week for? It's Peloton. I mean, we're kicking off a sales cycle where they would bank on anybody who's going to be able to buy one of those connected devices, you know, outside of just signing up for a digital subscription, moving some of the inventory through Dick's. These new partnerships that they've really drummed up and added a lot of promotional element to between their partnership with Dicks, between the wholesale partnership with Amazon. Just looking to see if they're able to move through some of that inventory, this could be a huge setup going into the rest of the holiday season.
BRIAN SOZZI: No, it's a great point. I'll make sure to mention it. We have a Rockin' Retail special at 2:00 PM. I'm going to be stationed at Oculus here in New York City with some really cool guests, including former Gap CEO and J. Crew CEO Mickey Drexler, friend of the show. I like him.
JULIE HYMAN: A lot of retail over there, a lot of high-end retail--
BRIAN SOZZI: Yeah, there's 111 shops in there. 368,000 gross square feet of retail space.
BRAD SMITH: [INAUDIBLE] is in there.
JULIE HYMAN: How empty are they these days?
BRIAN SOZZI: We're going to find out soon.
JULIE HYMAN: I want you to do walk-through--
BRIAN SOZZI: I will take a photo for you.
JULIE HYMAN: --before you broadcast from there.