December 6, 2019

Q3 2019 U.S. Retail Scorecard – Update Dec. 5, 2019

by Jharonne Martis.

Ninety one percent of companies in our Retail/Restaurant Index have reported Q3 2019 EPS. Of the 190 companies in the index that have reported earnings to date, 68% have reported earnings above analyst expectations, 6% reported earnings in line with analyst expectations and 26% reported earnings below analyst expectations. The Q3 2019 blended earnings growth estimate is 4.0%.

 The Q3 2019 blended revenue growth estimate is 5.6%. Fifty four percent have reported revenue above analyst expectations and 46% reported revenue below analyst expectations.

Exhibit 1: Refinitiv Earnings Dashboard

Source: I/B/E/S data from Refinitiv

Black Friday / Cyber Monday

Consumers opened their wallets during the holiday kickoff as retailers ramped up their Black Friday and Cyber Monday promotions. The average promotional discount was slightly higher on Black Friday (43.9%) than Cyber Monday (43.2%). Still, these average promotional discounts did not surpass the 44.3% average that has prevailed over the last two months. Refinitiv discovered this in a collaboration with StyleSage Co., which analyzes retailers, brands, online trends and products across the globe.

The majority of discounting happened at the mid-value stores. About 74% of the merchandise at mid-tier department stores was on sale this year, which could potentially hurt Q4 margins (Exhibit 2). The specialty sector had 48% of its merchandise on sale, followed by the premium sector at 39%.

Exhibit 2: Discount Penetration by Sector 2016 – 2019

Source: StyleSage Co.

 Meanwhile, the average promotional discounts among all the sectors were also higher during Black Friday vs. Cyber Monday. The mid-value sector saw the highest average promotional discount among the department stores during at 31%, followed by the Specialty sector at 19% and the Premium sector at 17% (Exhibit 3).

Exhibit 3: Average Promotional Discount by Sector: Black Friday vs. Cyber Monday 2019

Source: StyleSage Co.

 Although the sold-out percentages at this point don’t look particularly high for any of the sectors, some merchandise was more popular than others (Exhibit 4). The categories more likely to have “sold out” over the five shopping days – Black Friday/Cyber Monday, include:

 Exhibit 4: Popular Categories by Sector: Black Friday through. Cyber Monday

Source: StyleSage Co.

Retail Earnings This Week

Luxury retailer Tiffany’s missed earnings and revenue estimates, as U.S. sales were hit by lower spending by foreign tourists. Meanwhile, its Chinese mainland sales saw robust double-digit growth, which bodes well as it goes into the LVMH family. Meanwhile, Dollar General smashed estimates, as it grows and expands its grocery offerings. This diversification shields the discounter from the possible impacts of the Chinese trade war.

Here are the Same Store Sales and Earnings estimates for retailers reporting earnings next week:

Exhibit 5: Same Store Sales and Earnings Estimates/Results – Week Of Dec 9, 2019

Source: I/B/E/S data from Refinitiv

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