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August 15, 2023

Q2 2023 U.S. Retail Scorecard – Update Aug. 15, 2023

by Jharonne Martis.

To date, 145 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2023, representing 72% of the index. Of those companies that have reported their quarterly results, 79% announced profits that beat analysts’ expectations, while 4% delivered on-target results and 17% reported earnings that fell below estimates. The Q2 2023 blended earnings growth estimate now stands at 17.6%.

The blended revenue growth estimate for the 199 companies in this index is 3.1% for Q2 2023. Of those companies that have reported their quarterly results so far, 64% announced revenue that exceeded analysts’ expectations and the remaining 36% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard


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

This Week in Retail

Home Depot beat its Q2 2023 earnings, same store sales and revenue estimates. The retailer also reiterated its full-year guidance, and said during its earnings call that it continues to experience pressure in certain big-ticket discretionary categories, and is promoting less-expensive products.

Still, during its earnings call, the home improvement retailer did echo the same sentiment as many other retailers which is that consumers are “shifting their spending from goods to services.” This was evident in today’s U.S. retail sales results.

Overall retail sales were up a beat in July, rising 0.7% versus the median analyst expectation of 0.4%. Similarly, ex-autos sales rose by 1.0%, above its 0.4% estimate. Still, the beat was anticipated given the increase in promotional activity during July to lure shoppers in. Consumers have become value-oriented and took advantage of the discounts and promotions during Prime Week to open up their wallets.

Accordingly, sales at nonstore retailers saw the strongest year-over year contributions at 10.3%, followed by sporting goods/hobby. Sales at restaurants/bars were also very strong. This is inline with the LSEG earnings data suggesting that when consumers open up their wallets, they are gravitating towards restaurants and bars or steep promotions.

Exhibit 2: U.S. Retail Sales – July 2023

Source: LSEG IFR

Back in July, Amazon offered online Prime deals, and other retailers including Target, Best Buy and Walmart ramped up their promotional events to also attract shoppers on the same days as the Prime event.

U.S. retail sales received a boost from online promotions in July. U.S. mall stores online become significantly more promotional – Target, for instance, became more promotional during Prime Week this year, hoping to lure more shoppers. Increasing price competition was evident in the rising online discounting data among U.S. retailers (Exhibit 3). LSEG discovered this in a collaboration with Centric Pricing.

Exhibit 3: Average Discount Penetration for U.S. Retailers: 2019 – 2023


Source: Centric Pricing, formerly StyleSage Co.

 

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