To date, 168 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2024, representing 84% of the index. Of those companies that have reported their quarterly results, 72% announced profits that beat analysts’ expectations, while 4% delivered on-target results and 24% reported earnings that fell below estimates. The Q2 2024 blended earnings growth estimate now stands at 14.2%.
The blended revenue growth estimate for the 199 companies in this index is 3.7% for Q2 2024. Of those companies that have reported their quarterly results so far, 51% announced revenue that exceeded analysts’ expectations and the remaining 49% reported that their revenue fell below analysts’ forecasts.
Exhibit 1: LSEG Earnings Dashboard
Source: LSEG I/B/E/S
This week in retail
Abercrombie surpassed its Q2 earnings, revenue, and same-store sales (SSS) estimates. The teen retailer was a favorite for back-to-school sales this summer and has now posted five consecutive quarters of double-digit comps. Although the retailer raised its full-year guidance, it cited a cautious environment for the second half of the year.
Meanwhile, department stores Nordstrom and Kohl’s reported mixed results. Nordstrom exceeded its Q2 earnings estimate but fell short on revenue and SSS. Its off-price sector was its strongest division, with a 4.1% SSS, surpassing the 4.0% estimate, highlighting consumers’ preference for value. The digital business also grew robustly by 6.0%. During its earnings call, the luxury retailer noted that promotions and store events led to tripled attendance compared to last year. As with other retailers, its active category was the top performer, showing double-digit growth, driven by brands like ON, New Balance, and Vuori.
However, Nordstrom warned that its credit card revenues as a percentage of total revenue declined modestly compared to Q2 of last year. “The decline was driven by higher losses, partially offset by higher balances and yield on the portfolio. This was consistent with our expectations, continuing the general trend over the last few years as consumers have faced increased budgetary pressures.” (Source: Nordstrom Q2 Earnings Call)
Kohl’s also reported mixed results. The department store exceeded its Q2 earnings estimate but fell short on revenue and SSS. Weak macroeconomic conditions and cautious consumers continue to pressure the retailer: “As … previously mentioned, our customers exhibited more discretion during the second quarter. Inflation and high interest rates continue to pressure spending, especially among our middle-income consumers.” (Source: Kohl’s Q2 Earnings Call)
Here are the Q2 2024 earnings and same store sales estimates for the companies reporting this week:
Exhibit 2: Same Store Sales and Earnings Estimates – Q2 2024
Source: LSEG I/B/E/S
Looking ahead, Gap is on track to report a 3.0% comp, an improvement from last year’s -6.0%. Analysts polled by LSEG are optimistic about the apparel store’s Q2 performance. The consumer is value-oriented, and Gap’s Old Navy division has the strongest SSS at 4.3%. The consensus for Gap Q2 2024 EPS is $0.40. However, a highly rated analyst has published a Bold Estimate, differing from the consensus, and expects Gap to report an EPS of $0.50. This suggests that Gap may beat earnings expectations and post a positive surprise.
The StarMine 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%) (Exhibit 3).
Exhibit 3: Gap StarMine SmartEstimate and Predicted Surprise %: Q2 2024
Source: LSEG Workspace
