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May 25, 2023

Q1 2023 U.S. Retail Scorecard – Update May 25, 2023

by Jharonne Martis.

To date, 171 of the 204 companies in our Retail/Restaurant Index have reported their EPS results for Q1 2023, representing 84% of the index. Of those companies that have reported their quarterly results, 77% announced profits that beat analysts’ expectations, while 2% delivered on-target results and 21% reported earnings that fell below estimates. The Q1 2023 blended earnings growth estimate now stands at 33.6%.

The blended revenue growth estimate for the 204 companies in this index is 4.6% for Q1 2023. Of those companies that have reported their quarterly results so far, 74% announced revenue that exceeded analysts’ expectations and the remaining 26% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: Refinitiv Earnings Dashboard

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

This week in retail

Ralph Lauren posted Q1 earnings and revenue, both stronger than expectations. The strength in Asia and Europe helped offset the weakness in the U.S. In Asia, Same Store Sales (SSS) grew a robust 20%, followed by Europe’s 8.0% SSS, above its U.S. -4.0% SSS.

Meanwhile, Best Buy beat earnings expectations, but sales slowed down. The electronics retailer saw robust growth over the past three years, boosted by pandemic sales and expected sales to start moderating in 2023. The company said during its earnings call that the consumer is “clearly feeling cautious and making trade-off decisions as they continue to deal with high inflation and low consumer confidence due to a number of factors.” Moreover, the company also said the consumer is “exhibiting some recessionary behaviors.” (Source: Best Buy Q1 2024 Earnings Call, May 25, 2023)

One company to watch this week is Ulta Beauty. Analysts polled by Refinitiv are already bullish on the company’s performance this quarter. The consensus for Ulta’s Q4 2022 EPS is $6.87. Moreover, the Refinitiv StarMine SmartEstimate data shows investors can expect positive surprises this quarter from Ulta. This quantitative tool has proven to be very valuable and accurate to help forecast financial expectations during earnings season.

The following chart displays estimates of earnings and same store sales expectations for retailers that are scheduled to release their Q1 2023 results this week.

Exhibit 2: Same Store Sales and Earnings Estimates–Q1 2023

Source: Eikon Workspace


So far, 171 retailers have reported Q1 earnings; of this group, 118 mentioned inflation. Looking ahead to Q2 2023, 18 retailers issued negative preannouncements, while four issued positive EPS guidance so far. Of those retailers offering revenue guidance, 20 warned of disappointing results, while only seven said revenue might be better than previously expected.

Exhibit 3: Earnings and Revenue Guidance: Q2 2023

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

Discount levels at U.S. mall stores

In Q1 2023 (Feb – April), 31% of U.S. retail online merchandise was on sale. Refinitiv discovered this in a collaboration with Centric Pricing, formerly StyleSage, which analyzes retailers, brands, online trends and products across the globe.

The May discount penetration (how much of the assortment is on sale) of 33% is above the 2023 average of 31%, as retailers try to move discretionary inventory from Q1. Demand for discretionary items has been weaker than usual as consumers trade down, and preferences have changed.

Meanwhile, the average percent discount in May has remained somewhat stable at 35.5% going into Q2. This is below the 2023 average of 38.2%. This means that retailers started Q2 offering more merchandise on sale with stable average discounts.

Exhibit 4: US Online Retail: Discount Penetration and Average Discount: 2019 – 2023

Source: Centric Pricing formerly StyleSage Co

Refinitiv/Ipsos Consumer Confidence

May’s Refinitiv/Ipsos Primary Consumer Sentiment Index finds that consumer confidence improved from last year’s levels. Against the backdrop of a better-than-expected jobs report and the continued downward trend in inflation (both of which were released after the field closed), this improvement in consumer sentiment is reflected across the sub‐indices, including Americans’ perceptions of current economic conditions, and their purchasing and investment confidence. Still, all eyes are on the U.S. debt ceiling resolution, which will affect this holding pattern.

Exhibit 5: Refinitiv/Ipsos Consumer Sentiment: 2010 – 2023

Source: Eikon Workspace

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