The picture emerging out of the Q3 earnings season for the traditional brick-and-mortar retailers is at best mixed, with a number of major players like Macy’s (M - Free Report) , Kohl’s (KSS - Free Report) and even Home Depot (HD - Free Report) clearly missing the mark. Many others, including Walmart (WMT - Free Report) and Target (TGT - Free Report) , have kept the momentum going by coming out with impressive results.
The issues facing traditional retailers are longstanding and deal with the steady shift in consumer spending to the online medium and the associated drop in foot traffic at the physical facility. In response, these players have been rationalizing their physical footprint and investing in integrating the online offering with the physical store. Walmart and Target appear to be quite further along in this transition than others like Macy’s and we saw that in these companies’ Q3 results as well.
For the Retail sector as a whole, where we include the online players and restaurant companies in addition to the aforementioned traditional operators, we now have Q3 results from 32 of the 38 retailers in the S&P 500 index. Total earnings for these companies are up +1.2% on +9.5% higher revenues, with 65.6% beating EPS estimates and 53.1% beating revenue estimates.
The charts below compare the Q3 results from these retailers with what we had seen from the same group of companies in other recent periods.
This is a weaker showing than we have seen from the group in other recent periods.
The Q3 EPS beats percentage at 65.6% is the fourth lowest of all 16 Zacks sectors (Basic Materials, Energy, and Utilities are the only ones that have an even lower EPS beats percentage) while the revenues beats percentage is in the middle of the 16 sector pack.
S&P 500 Scorecard (as of Friday, November 22nd, 2019)
We now have Q3 results from 477 S&P 500 members or 95.4% of the index’s total membership. Total earnings (or aggregate net income) for these 477 companies are down -1.2% from the same period last year on +4.3% higher revenues, with 73% beating EPS estimates and 57.7% beating revenue estimates.
The comparison charts below put the Q3 earnings and revenue growth for these 477 index members in the context of what these same companies had reported in other recent periods.
The comparison charts below put the Q3 EPS and revenue beats percentages in historical context.
Looking at Q3 as a whole, combining the actual results from the 477 index members with estimates for the still-to-come companies, total earnings (or aggregate net income) is expected to be down -1.7% from the same period last year on +4.2% higher revenues.
The table provides a summary view of Q3 expectations contrasted with actual results for the preceding period.
Tough comparisons to last year when growth was boosted by the tax cut legislation were all along expected to weigh on earnings growth in 2019. Moderating U.S. economic growth and notable slowdowns in other major global economic regions are having a further negative impact. Uncertainty about the global trade regime and growing resort to tariffs are not helping matters either.
Estimates for the current period (2019 Q4) have come down since the quarter got underway, as the chart below shows.
The chart below shows the earnings and revenue growth picture for the S&P 500 index for Q3, contrasted with what was actually reported in the preceding 4 quarters and what is expected in the following 2 periods.
For an in-depth look at the overall earnings picture and expectations for Q3 and beyond, please check out our weekly Earnings Trends report >>> Weak Retail Sector Earnings
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