With 95% of the 204 companies in our Retail/Restaurant Index now having reported their EPS results for Q1 2022 (a total of 189), so far two-thirds, or 68%, announced profits that beat analysts’ expectations. Another 3% of these companies delivered on-target result, while 29% reported earnings that fell below estimates. The Q1 2022 blended earnings growth estimate now stands at -17.0%.
The blended revenue growth estimate for the 204 companies in this index now stands at 10.9% for Q1 2022. Of those companies that have reported their quarterly results so far, 73% announced revenue that exceeded analysts’ expectations and the remaining 27% reported that their revenue fell below analysts’ forecasts.
Exhibit 1: Refinitiv Earnings Dashboard
Source: I/B/E/S data from Refinitiv
This week: Q1 2022 earnings
Affluent consumers seem prepared to continue to spend freely, undeterred by higher prices. The upscale leisurewear chain Lululemon offered more evidence of this. Earlier this year, the retailer announced price increases to help the company blunt the impact of rising raw materials prices. Consumers shrugged this off, and strong demand for new merchandise boosted Lululemon’s sales both in stores and online. The retailer reported a 28.0% SSS increase, higher than the original estimate of a 21.7% SSS gain. While analysts had expected a 15.0% increase in online SSS, Lululemon blew those forecasts out of the water by reporting a 40.0% rise in e-commerce. The firm’s international sales results also were robust, despite the fact that Covid-19 related lockdowns have left as many as a third of its 71 stores in China closed in recent months. The company told analysts that this has had a “modest” impact both on those stores and on vendors.
Even Lululemon’s robust demand couldn’t shield the company completely from the impact of inflation and supply chain issues that are affecting retailers as a group. the strength in demand, the retailer is not immune to inflation and supply chain issues. Lululemon cautioned investors that “ocean lead times are not improving and air freight costs remain high” during the retailer’s earnings call. (Source: Lululemon Earnings Call, June 2, 2022). It’s essential for the retailer to be able to satisfy the demand for new merchandise on the part of its loyal shoppers. That means that they must, however reluctantly, accept the burden of those high air freight expenses. The impact of these expenses is included in their forward guidance, although the company raised expectations for revenue and earnings as a result of strong consumer demand.
Other retailers continue to deliver similar warnings about the impact of rising prices as they reported their earnings for Q1 2022, warning that inflation will serve as a headwind going forward. Of the 189 retailers that already have reported Q1 earnings, 170 referred to inflation concerns and 173 flagged supply chain issues.
Exhibit 2: Same Store Sales and Earnings Estimates–Q1 2022
Source: Source:Eikon
