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August 17, 2023

Q2 2023 U.S. Retail Scorecard – Update Aug. 17, 2023

by Jharonne Martis.

To date, 152 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2023, representing 76% of the index. Of those companies that have reported their quarterly results, 79% announced profits that beat analysts’ expectations, while 5% delivered on-target results and 16% reported earnings that fell below estimates. The Q2 2023 blended earnings growth estimate now stands at 19.2%.

The blended revenue growth estimate for the 199 companies in this index is 3.2% for Q2 2023. Of those companies that have reported their quarterly results so far, 63% announced revenue that exceeded analysts’ expectations and the remaining 37% 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

As predicted by StarMine data, it was another stellar quarter for Walmart. The discounter beat its Q2 2023 estimates and reinforced the proposition that the consumer is still looking for value. Moreover, the upper middle class, high-end consumer is still trading down. Walmart said, “We see people across income cohorts come to us more frequently looking to save money on everyday needs.” (Source: Walmart Q2 2023 Earnings Call)

Good TJX results also confirmed strong traffic from shoppers that still want the latest luxury brands for less.

Exhibit 2: Same Store Sales and Earnings Estimates–Q2 2023

Source: LSEG I/B/E/S

Guidance and inflation

Inflation is still a big concern for retailers. Of the 152 retailers that have reported Q2 earnings, 88 mentioned inflation. Today, Walmart said during its call that in the remainder of the year, “our immediate focus is on getting product costs and retails down to fight inflation, which will help with mix; improving execution of pickup and delivery orders; expense management; and inventory management by item and category.”

Looking ahead to Q3 2023, 14 retailers issued negative preannouncements, while five issued positive EPS guidance so far. Of those retailers offering revenue guidance, 14 warned of disappointing results, while only seven said revenue might be better than previously expected.

Exhibit 3: Earnings and Revenue Guidance: Q2 2023 and Q3 2023

Source: LSEG I/B/E/S

July was the strongest sales month during the quarter for a number of retailers. This was echoed by several retailers including Children’s Place and Target: “Within the quarter, comp trends softened from the second half of May into June, before we saw a meaningful recovery in both traffic and comps in July”. This is inline with U.S. retail sales results for July which came in much stronger than expected.

The strength of July U.S. retail sales coincided with the high promotions retailers offered during Amazon’s Prime Week. Retailers ramped up the average discount and discount penetration (amount of merchandise on sale) in July to their highest levels this year. This underlines how value-oriented the consumer is right now, as LSEG discovered in a collaboration with Centric Pricing (Exhibit 4).

Exhibit 4: Average Discount Penetration for U.S. Retailers: 2019 – 2023

Source: Centric Pricing, formerly StyleSage Co.

 

 

 

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