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September 7, 2023

Q2 2023 U.S. Retail Scorecard – Update Sep. 7, 2023

by Jharonne Martis.

To date, 195 of the 200 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2023, representing 98% of the index. Of those companies that have reported their quarterly results, 78% announced profits that beat analysts’ expectations, while 5% delivered on-target results and 17% reported earnings that fell below estimates. The Q2 2023 blended earnings growth estimate now stands at 20.3%.

The blended revenue growth estimate for the 200 companies in this index is 3.3% 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

American Eagle beat its Q2 revenue and earnings estimates. However, it missed its -0.9% SSS estimate with a -2.0% SSS result. Still, the retailer raised its annual outlook and said that “trends through the back-to-school shopping period have been strong with AE positive and Aerie delivering a double-digit comp quarter-to-date.” (Source: AEO Q2 Earnings Call, 9/7/2023)

As the second quarter earnings season comes to a close, a few consumer behavior themes emerged:

  • Consumers are value driven. Strong discounts continue to attract shoppers.
  • Middle-class and high-end consumers continue to trade down and gravitate toward discounters.
  • Consumers are starting to expand their shopping, purchasing discretionary items.
  • Beauty continues to be strong.
  • Back-to-school sales look healthy.
  • Inflation continues to worry consumers and retailers.

Moreover, this Q2 earnings season has seen more retailers missing revenue estimates (37%) compared to the previous four quarters’ average (34.8%). Still, as the pandemic and supply chain woes have faded, they are dealing with better management of cost controls and lower freight and shipping expenses. As a result, more retailers are beating earnings estimates (78%) than the previous four quarters’ average (70.6%).

Exhibit 2: Earnings and Revenue Scorecard – Q2 2023

Source: LSEG I/B/E/S

Here are the Q2 2023 earnings and same store sales estimates for the companies reporting this week:

Exhibit 3: Same Store Sales and Earnings Estimates–Q2 2023

Source: LSEG I/B/E/S

Discount levels – U.S. online retailers

The discount penetration (how much of the assortment is on sale) rose to its highest level this year. LSEG discovered this in a collaboration with Centric Pricing, formerly StyleSage, which analyzes retailers, brands, online trends and products across the globe. For Labor Day weekend, the discount penetration was 38%, above the 2023 average of 32%, as retailers face a more price-cautious consumer.

Meanwhile, the average percent discount in September has declined to 36.2%. This means that retailers are ramping up the amount of merchandise on sale. However, the average discount is lower than last year’s 38.3% average, suggesting that retailers are luring shoppers with more merchandise on sale, but are being more cautious with margins.

Exhibit 4: Discount Penetration and Average Discount: U.S. Online Retailers

Source: Centric Pricing formerly StyleSage Co.

 

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