As the year comes to an end, U.S. consumer confidence is up vs. a year ago. Likewise, the Thomson Reuters Same Store Sales Index is looking at a 1.7% growth, stronger than last year’s 0.8% result.
Consumer confidence, as measured by the Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI), is flat finishing out 2017. The overall index for December stands at 60.7 for American consumer confidence –– an increase of just 0.2% compared to last month and up 2.3% Y/Y.
Likewise, analysts polled by Thomson Reuters are becoming more bullish on consumer spending as we move forward into the holiday shopping season. Analysts continue to raise their Q4 same store sales outlook for several retailers (Exhibit 1). As a result, the Thomson Reuters Same Store Sales Index is now looking at a 1.7% Q4 2017 growth, up from the 1.5% SSS estimate at the beginning of November.
American Eagle’s Aerie has seen a 7.6% improvement in SSS since November. A month ago the teen retailer had a 12.3% SSS estimate — now has the strongest SSS estimate at 19.8% for Q4 2017. Similarly, Urban Outfitters is getting a boost from sales at its divisions including Anthropologie, Urban Outfitters and free People.
Exhibit 1: Biggest Q4 2017 SSS improvement since November
Source: I/B/E/S estimates
Not-so-shiny bling
On the flip side, jewelry retailers have been struggling the most and analysts have become bearish on them. Signet Jewelers is hurting the most from sales at its divisions including Sterling Jewelers, sales in the U.K. and Zale Jewelry. The same can be said for Tiffany, where sales outlooks have been declining in Europe and Japan.
Exhibit 2: Biggest Q4 2017 SSS decline since November
Source: I/B/E/S estimates
Good foundations
As the housing industry continues to do well, so do retailers that are associated with the industry including Home Depot and Ethan Allen (Exhibit 3). Still, Ulta Cosmetics continues to be a favorite during the holiday season. Customers are gravitating to Costco for gifts and groceries. Lululemon’s strength underlines that the athleisure trend is still strong. Finally, within the teen retail space, American Eagle and Zumiez are two favorites.
Exhibit 3: Strongest Q4 2017 SSS estimates
Source: I/B/E/S estimates
Struggling retailer
Sears continues to have the weakest SSS estimate in our retail universe. The retailer has a -10.5% SSS estimate. Meanwhile, the bulk of the Q4 2017 negative guidance (37%) is coming from the apparel sector. Accordingly, the weakness continues in the apparel sector.
Exhibit 4: Weakest Q4 2017 SSS estimates
Source: I/B/E/S estimates
