To date, 140 of the 204 companies in our Retail/Restaurant Index have reported their EPS results for Q4 2023, representing 68% of the index. Of those companies that have reported their quarterly results, 68% announced profits that beat analysts’ expectations, while 4% delivered on-target results and 28% reported earnings that fell below estimates. The Q4 2023 blended earnings growth estimate now stands at 34.4%.
The blended revenue growth estimate for the 204 companies in this index is 4.5% for Q4 2023. Of those companies that have reported their quarterly results so far, 56% announced revenue that exceeded analysts’ expectations and the remaining 44% reported that their revenue fell below analysts’ forecasts.
Exhibit 1: LSEG Earnings Dashboard
Source: I/B/E/S data from LSEG
Guidance
So far, 140 retailers have reported Q4 earnings; of this group, 83 mentioned inflation. Looking ahead to Q1 2024, 20 retailers issued negative preannouncements, while only two issued positive EPS guidance so far (Exhibit 2). Of those retailers offering revenue guidance, 19 warned of disappointing results, while only 11 said revenue might be better than previously expected.
Exhibit 2: Earnings and Revenue Guidance: Q1 2024
Source: LSEG I/B/E/S
This week in retail
Macy’s reported a 43.3% jump in earnings growth from a year ago. The department store reported a $2.45 EPS, but -1.7% decline in revenue. During the earnings call, the department store focused on its new growth strategy. This includes closing 150 of its least productive stores, and focusing more on luxury at Bloomingdale’s and Bluemercury.
Meanwhile, Urban Outfitters is on track to post a robust 5.4% SSS for Q4 2023. The retailer is receiving a boost from both its Free People and Anthropologie divisions, which are on track to post comps of 12.2% and 16.0%, respectively. This is impressive considering that these retailers are facing difficult comparisons from a year ago.
TJX is expected to be another winner this week with a 4.2% SSS for Q4 2023. The off-price retailer is receiving a boost from the upper middle-class consumer, who wants designer clothing for less.
Moreover, the LSEG StarMine SmartEstimate data shows investors can expect positive surprises this quarter from Gap. This quantitative tool has proven to be very valuable and accurate to help forecast financial expectations during earnings season. The Q4 2023 earnings consensus for Gap’s year is $0.23.
The SmartEstimate is a weighted average of analyst estimates, with more weight given to more recent estimates and more accurate analysts. Our studies have shown that when the SmartEstimate differs from the consensus (I/B/E/S mean) by more than 2%, the company is likely to post subsequent earnings surprises directionally correct 70% of the time. This percentage difference is referred to as the Predicted Surprise (PS%).
The Predicted Surprise for Gap is 16.0%, suggesting the retailer is likely to beat the $0.23 earnings expectations and post a positive surprise.
Here are the Q4 2023 earnings and same store sales estimates for the companies reporting this week:
Exhibit 3: Same Store Sales and Earnings Estimates – Q4 2023
Source: LSEG I/B/E/S
Accordingly, the average percent discount in February has also declined to 36.7%, below last year’s 38.0%.
Exhibit 4: Average Discount: U.S. Online Retailers
Source: Centric Market Intelligence, formerly StyleSage Co.
