by Jharonne Martis.
Retailers continue to report Q1 2019 earnings, and 55 retailers have mentioned tariffs during their Q1 earnings call. Although they have expressed concern about proposed tariffs imposed on Chinese products, a faster and more direct hit to the consumer’s discretionary income would be tariffs imposed on Mexico.
The United States’ southern neighbor is its third largest trading partner and important import sectors for the U.S. are produce and car parts.
Weather was a major factor. May was a historic month for tornadoes after 13 consecutive days of twisters damaged a lot of farms and crops. This means that if the food supply is hit, more produce will have to be imported from abroad–most likely Mexico. Consumers will have to pay higher grocery prices, which directly hurts low-income consumers the most. If consumers have to spent more on staples such as groceries, they will put their hands in their pockets and hold back on discretionary spending. That, in turn, could potentially hurt future retail sales and earnings.
The latest results
Here are the Same Store Sales and Earnings results for retailers reporting earnings in the week of May 31, 2019:
EXHIBIT 1: SAME STORE SALES AND EARNINGS RESULTS – WEEK OF MAY 31, 2019
Source: I/B/E/S data from Refinitiv
Eighty percent of companies in our Retail/Restaurant Index have reported Q1 2019 EPS. Of the 181 companies in the index that have reported earnings to date, 72% have reported earnings above analyst expectations, 6% reported earnings in line with analyst expectations and 22% reported earnings below analyst expectations. The Q1 2019 blended earnings growth estimate is 8.1%.
The 1Q 2019 blended revenue growth estimate is 5.0%. Fifty-seven percent have reported revenue above analyst expectations and 43% reported revenue below analyst expectations.