Q4 2024 U.S. Retail Preview: Sales Spike Over Holiday Season

The LSEG U.S. Retail and Restaurant Q4 earnings index, which tracks changes in the growth rate of earnings within the sector, is expected to show a 13.0% growth over last year’s levels. Our metrics show that six of 10 consumer-related industries have turned negative. (Exhibit 1)

Of the 195 retailers tracked by LSEG, the Broadline Retail sector is headed for the highest earnings growth rate in the fourth quarter, recording a 71.0% surge over last year’s level. The second-strongest sector is Hotels, Restaurants & Leisure with a 6.2% growth estimate. Consumer Confidence improved towards the end of the fourth quarter, boosting shoppers’ positive outlook.

At the other end of the spectrum, Leisure Products has the weakest anticipated Q4 2024 estimate, with profits expected to decline by -35.1% (Exhibit 1). To date, 70 of the 195 companies in our Retail/Restaurant Index have reported their EPS results for Q4 2024, representing 36% of the index.

Exhibit 1: The LSEG Retail Earnings Growth Rate – Q4 2024

Source: LSEG I/B/E/S

Within the Broadline Retail sector, Amazon recorded the strongest earnings growth rate of 86.0%. The online retailer has the biggest weighting in the group and is boosting the sector’s growth rate. Still, of the seven companies in this group, only three are on track to post positive estimated earnings growth for Q4, while Kohl’s and Macy’s have the weakest estimated earnings growth rates.

The second strongest sector is Hotels, Restaurants & Leisure. Of the 47 companies in this group, 33 are on track to post positive estimated earnings growth for Q4. Shake Shack is on track to post the strongest earnings growth rate of 1056.7%. Meanwhile, Carnival Corp. and Brinker International already recorded robust earnings growth rates of 300.0%, and 182.8%, respectively.

In contrast, the Leisure Products group is on track to post the weakest year-over-year earnings comparisons. Negative growth expectations are directly responsible for the forecast decline in the overall earnings growth rate within the group. Four out of seven companies struggled to match year-ago earnings growth levels. Brunswick Corp. and Polaris already reported an 83.4%, and 53.5% decline in earnings growth in the fourth quarter of 2024.

So far, 70 companies or 36% of those in our Retail/Restaurant Index, have reported earnings for Q4 2024. Of this group, 71% announced earnings that exceeded analysts’ expectations, while 4% matched those forecasts and the remaining 25% reported earnings that fell below analysts’ predictions (Exhibit 2). The blended earnings growth estimate for Q4 2024 is 13.0%.

To date, 70 companies in the Retail/Restaurant index have reported revenue for Q4 2024. For this group, the Q4 2024 blended revenue growth estimate is 3.7%; 74% have reported revenue above analyst expectations, and 26% reported revenue below analyst expectations.

Exhibit 2: LSEG Earnings Dashboard

Source: LSEG I/B/E/S

This week in retail

LSEG IFR Markets forecasts a challenging development for Q1 U.S. retail sales, with overall retail sales anticipated to decline by 0.1%, and ex-autos sales to increase by 0.3% in January 2025. Ex-autos group is expected to fare slightly better with a 0.3% rise, though this still reflects a sluggish start to the year following November’s 0.7% and December’s 0.4% results.

Exhibit 3: U.S. Retail Sales – May 2024

Source: LSEG IFR Markets

Amazon reported revenues of $187.8 billion for Q4 2024, making it the company with the largest revenue this quarter (Exhibit 4). This marks the first time a company has surpassed Walmart, which had held the top spot for 12 years. Walmart’s revenue consensus estimate for this quarter is $180.1 billion. Below is the list of the top 10 companies by quarterly revenue for this quarter, using consensus estimates for those that haven’t reported and actuals for those that have. The table below focuses solely on the S&P 500 companies, using the current constituents.

Exhibit 4: Top 10 Revenues for Q4 2024

Analysts polled by LSEG are already bullish on Walmart’s Q4 performance. The consensus for Walmart’s Q4 2024 EPS is $0.64. However, there’s a five-star rated analyst with a very accurate rating that published a Bold Estimate, which is different (in this case higher) than the consensus estimate. The analyst expects Walmart to report EPS of $0.69, above the mean. This suggests that it’s likely that Walmart will beat earnings and post a positive surprise.

Moreover, Walmart is ranked in the top decile for the StarMine Short Interest models (Exhibit 5). The retailer scores a notable 95 out of 100 on the Short Interest Model, indicating that investors are not betting against the company. Additionally, Walmart scores an impressive score of 88 out of 100 on the StarMine Prime Momentum, benefiting from favorable stock price momentum. It also has a score of 79 out of 100 on the StarMine Earnings Quality (EQ) Model, reflecting sustainable earnings.

Exhibit 5: Walmart StarMine Model Scores

Source: LSEG Workspace

Guidance

So far, 70 retailers have reported Q4 2024 earnings; of this group, many have cited higher prices, challenging macroeconomic conditions and a cautious consumer as contributing factors. About 57% of retailers have also discussed the impact of tariffs.

The bulk of retailers still have to report Q4 2024 results. Going into the quarter, 33 retailers issued negative preannouncements, while eight issued positive EPS guidance so far (Exhibit 6). Of those retailers offering revenue guidance, 35 warned of disappointing results, while 28 said revenue might be better than previously expected.

Exhibit 6: Earnings and Revenue Guidance: Q4 2024

Source: LSEG I/B/E/S

Retail sales

The LSEG Same Store Sales (SSS) index is expected to see a healthy 2.5% gain in Q4 2024 (Exhibit 7). An increase of 3.0% in SSS signals that consumer spending is healthy. Looking back one year, Q4 2023 SSS notched a gain of 3.0%.

It’s very important to note that due to the pandemic, the 2020-2022 results don’t offer an apples-to-apples comparison of current trends relative to previous years, as many retailers were closed due to shelter in place regulations.

Exhibit 7: LSEG Same Store Sales Index: 2021 – Present

Source: LSEG I/B/E/S

Abercrombie & Fitch is on track to post its seventh quarter of robust SSS growth. The teen retailer has a 9.8% SSS estimate for Q4 on top of difficult comparisons from a year-ago. Its comp estimate is a sign that teenagers are still willing to pay $100 for a “must have” pair of distressed denim jeans.

Consumers went shopping for new apparel during the holiday season. As a result, the apparel sector performed better in Q4. Six of the top ten SSS performers are from the apparel group. A few standouts this quarter include Zumiez, Urban Outfitters, and Citi Trends, which are on track to report comps of 5.8%, 5.1% and 5.0%, respectively. Zumiez is facing easy comparisons from a year ago.

Meanwhile, Lululemon was a favorite during the pandemic and is still in the top ten SSS for the quarter. The yoga pants maker is expected to post another healthy SSS growth of 3.7% for Q4 2024, despite facing very difficult comps from a year ago.

Consumers continue to feel the pressure of higher food prices on their spending power and continue to gravitate towards the discounters for everyday low prices. As a result, discounters continue to demonstrate their ability to maintain business volume despite the difficult comparisons. Walmart has a loyal customer following that is looking to save money and is expected to report a 4.0% SSS. Meanwhile, Costco already reported a Q4 gain of 5.2%, matching its SSS estimate.

Exhibit 8: Strongest Same Store Sales Estimates: Q4 2024 Estimate vs. Q4 2023 Actual

Source: LSEG I/B/E/S

On the other hand, the home goods group received a boost during the pandemic, but sales have slowed down since. As a result, Havertys Furniture, and LoveSac are all in the bottom ten SSS performers for Q4 (Exhibit 9). Similarly, the department stores have been out of favor for some time placing Kohl’s and Dillard’s with estimates of -6.3% and -4.5% respectively.

Exhibit 9: Weakest Same Store Sales Estimates: Q4 2024 Estimate vs. Q4 2023 Actual

Source: LSEG I/B/E/S

Restaurant Same Store Sales

The LSEG Restaurant Same Store Sales (SSS) index is expected to see a 0.3% growth in SSS in Q4 2024, on top of facing last year’s difficult comparison of 3.8% gain. (Exhibit 10).

Within this industry, the Casual Dining sector is on top with a 3.8% SSS estimate, stronger than the Quick Service sector. The Quick Service sector is on track to see a -0.9% SSS.

It’s important to note that, once again, the 2020-2021 results don’t offer an apples-to-apples comparison over previous years, given that quarantine rules and other pandemic restrictions forced many restaurants to close. As a result, a number of restaurants didn’t report SSS data during the pandemic.

Exhibit 10: LSEG Restaurant Same Store Sales Index: 2019 – Present

Source: LSEG I/B/E/S

About 65% of restaurants in our SSS index are on track or have posted positive Q4 2024 SSS. Still, restaurants are facing very difficult comparisons from a year ago. Starbucks currently has one of the weakest SSS estimate of -4.6%, as it faces a tough 5.0% SSS from last year. Likewise, Papa John’s has a -2.8% SSS estimate, below last year’s 0.1% comp result.

Exhibit 11: Weakest Restaurant Same Store Sales Estimates: Q4 2024 Estimate vs. Q4 2023 Actual

Source: LSEG I/B/E/S

On the other hand, Wingstop faced the most difficult comparison from a year ago at 21.2%, and is on track to report an 11.4% comp. Meanwhile, Chipotle reported a 5.4% SSS result, slightly below its 5.6% comp estimate, and below than last year’s 8.4% result.

Exhibit 12: Strongest Restaurant Same Store Sales Estimates: Q4 2024 Estimate vs. Q4 2023 Actual

Source: LSEG I/B/E/S