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June 5, 2024

Q1 2024 U.S. Retail Scorecard – Update June 5, 2024

by Jharonne Martis.

To date, 183 of the 201 companies in our Retail/Restaurant Index have reported their EPS results for Q1 2024, representing 91% of the index. Of those companies that have reported their quarterly results, 73% announced profits that beat analysts’ expectations, while 1% delivered on-target results and 26% reported earnings that fell below estimates. The Q1 2024 blended earnings growth estimate now stands at 22.5%.

The blended revenue growth estimate for the 201 companies in this index is 4.0% for Q1 2024. Of those companies that have reported their quarterly results so far, 53% announced revenue that exceeded analysts’ expectations and the remaining 47% reported that their revenue fell below analysts’ forecasts.

Exhibit 1: LSEG Earnings Dashboard

Source: LSEG I/B/E/S 

THIS WEEK IN RETAIL

As the first quarter earnings reports roll in from the retailers within the LSEG Retail/Restaurant Index, a significant trend emerges: over 50% of companies are acknowledging the impact of inflation during their earnings calls. This highlights that consumers are still contending with persistent inflationary pressures, emphasizing the crucial importance of value propositions in today’s market landscape.

Among the reported results, it’s evident that consumers are gravitating towards value-driven options, with discounters, off-price retailers, and select apparel stores posting the strongest same-store sales (SSS) figures. Despite the challenges posed by inflation, consumers are showing a willingness to indulge in discretionary spending, albeit cautiously. Notably, this surge in consumer confidence comes at a time when the discount penetration (the amount of discounted merchandise) is at its lowest in over five years, LSEG discovered in a collaboration with Centric Market Intelligence.

Conversely, the initial surge in demand for home goods and high-tech consumer electronics during the pandemic’s onset has tapered off, leading to sustained lower demand in these sectors.

Athleticwear remains a bright spot across various retail channels, with Gap, Nordstrom Rack, and Dick’s Sporting Goods demonstrating strong performance. Lululemon, in particular, is expected to announce a commendable 7.2% increase in same-store sales for Q1 2024, a remarkable achievement given the challenging double-digit comparisons from the previous year. Analysts predict earnings of $2.38 per share for Lululemon Athletica Inc, with revenue projected to grow by 9.6% in Q1, according to the LSEG mean analyst estimate.

Despite the positive outlook, Lululemon’s stock price has seen a 15% decline over the past month. Analyst sentiment, as reflected by the StarMine ARM Model, suggests that pessimism is already factored into the stock price. However, the StarMine Short Interest Model indicates that short sellers are not actively betting against the company.

Looking ahead, more discounters are set to report Q1 earnings this week. Ollie Bargain is expected to report a 2.6% SSS, followed by Dollar Tree with a 2.2% SSS. The prevalence of sticky inflation has led to increased pressure on low-end consumers, prompting a trend of trading down. Within the discount sector, Walmart continues to assert its dominance, gaining significant market share.

Here are the Q1 2024 earnings and same store sales estimates for the companies reporting this week:

Exhibit 2: Same Store Sales and Earnings Estimates – Q1 2024
Source: LSEG I/B/E/S

GUIDANCE

So far, 183 retailers have reported Q1 2024 earnings; of this group, 105 mentioned inflation.

Looking ahead to Q2 2024, 24 retailers issued negative preannouncements, while six issued positive EPS guidance so far (Exhibit 3). Of those retailers offering revenue guidance, 26 warned of disappointing results, while fourteen said revenue might be better than previously expected.

Exhibit 3: Earnings and Revenue Guidance: Q2 2024

Source: LSEG I/B/E/S

DISCOUNT LEVELS – U.S. ONLINE RETAILERS

The discount penetration (how much of the assortment is on sale) has declined this year. LSEG discovered this in a collaboration with Centric Market Intelligence, formerly StyleSage, which analyzes retailers, brands, online trends and products across the globe. Despite the recent Memorial Day discounts, the year-to-date average is now at its lowest point in over five years.

Exhibit 4: Average Discount Penetration: U.S. Online Retailers
Source: Centric Market Intelligence, formerly StyleSage Co.

Accordingly, the average percent discount in June has also declined to 34%, below last year’s 38.0%.

Exhibit 5: Average Discount: U.S. Online Retailers

Source: Centric Market Intelligence, formerly StyleSage Co.

 

 

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