To date, 187 of the 199 companies in our Retail/Restaurant Index have reported their EPS results for Q2 2024, representing 94% of the index. Of those companies that have reported their quarterly results, 71% announced profits that beat analysts’ expectations, while 5% delivered on-target results and 24% reported earnings that fell below estimates. The Q2 2024 blended earnings growth estimate now stands at 14.3%.
The blended revenue growth estimate for the 199 companies in this index is 3.6% 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
As earnings season winds down, several critical themes from the second quarter have emerged. Consumers are increasingly value-oriented and shopping where it’s most convenient for them. This trend is reflected in the improvement in e-commerce sales reported in Q2 by companies like Walmart and Dick’s Sporting Goods. Discounters offering value and a strong omnichannel strategy are benefiting from the current macroeconomic climate.
This strategy also drove robust back-to-school sales for Walmart, Target, TJX, and Gap. Teenagers, who are often influenced by the latest trends, also gravitated towards Abercrombie & Fitch. These retailers could continue to benefit from back-to-school trends as students return to school, observe their classmates’ fashion, and shop for the latest styles.
Athletic wear remains one of the strongest discretionary categories despite the challenging consumer climate. Foot Locker and Dick’s Sporting Goods both exceeded Q2 earnings, revenue, and same-store sales estimates. Dick’s Sporting Goods, a strong performer, continues to invest in its omnichannel strategy for the long term. “At the heart of our strategies is our omnichannel athlete experience. We’re continuing to invest across our digital and store experiences to meet our athletes wherever they are, create confidence and excitement, and get products into their hands faster.” To enhance its digital shopping experience, the sports retailer is also incorporating “elevated imagery, 3D viewing of select footwear, and AI-powered chat features.” (Source: DKS Q2 2024 Earnings Call) Dick’s Sporting Goods’ private brands resonate well with consumers, though the company provided conservative guidance for the second half of 2024.
As a standalone store, Dick’s Sporting Goods has an edge over Foot Locker, which has suffered from weak mall traffic. Nevertheless, Foot Locker saw improvement through the quarter, particularly as it approached the back-to-school season with the right assortment. Foot Locker reported its first positive comparable sales after six consecutive quarters of negative same-store sales. The Champs store banner also performed well. The right brands and partnerships are crucial in sports retail, and Foot Locker plans to expand megastores in key locations, including New York, in collaboration with Nike.
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
Retail outlook: 2H2024
Looking ahead, retailers are cautioning that they might face an even more frugal consumer in the second half of the year. Many have cited higher prices, challenging macroeconomic condition, and a cautious consumer as contributing factors. Consequently, the LSEG Retail/Restaurant Index is projecting weaker consumer spending in the second half of the year (Exhibit 3). The Q2 2024 blended earnings growth estimate now stands at 14.3%, but is expected to drop to 0.9% in Q3 2024.
Exhibit 3: LSEG Retail/Restaurant Index Earnings Growth Rates: Q1 – Q4 2024 Est
Source: LSEG I/B/E/S
Retailers also report that consumers are waiting for promotional events to purchase discretionary items. October marks the beginning of the holiday shopping season. Although Amazon has not officially announced any dates for a second Prime Day in October, retailers often align their promotions with such events to attract shoppers. Earlier this year, U.S. retail sales saw a significant increase in July, boosted by Amazon Prime-related events.
The discount penetration (how much of the assortment is on sale) rose to its highest level in July this year, as consumers took advantage of promotional events and splurged on discretionary items (Exhibit 4). This trend was identified through a collaboration between LSEG and Centric Market Intelligence, which analyzes retailers, brands, online trends, and products globally. Given the current economic climate, it is likely that a similar trend will continue into the holiday season.
Exhibit 4: Average Discount Penetration: U.S. Online Retailers
Source: Centric Market Intelligence.
Although more merchandise is discounted, the average percent discount in August was in line with this year’s average of 36%.
Exhibit 5: Average Discount: U.S. Online Retailers
Source: Centric Market Intelligence
