As earnings season continues, investors and traders alike have their eyes on quarterly revenue reports, seeking to gain a better understanding of where the U.S. economy stands in the new year. With inflation rates continuing to remain far above the ‘ideal’ annualised rate of two percent, retail earnings may be especially enlightening for those looking to get a grasp of how American consumer behaviour has developed recently.
Walmart Beats Predictions
Retail giant Walmart (WMT) released earnings to the public last Tuesday, February 21st, providing mixed indications for recent shopping trends as well as the outlook for the near future.
Given that Walmart’s product offering is generally more attainable at a lower cost for consumers, it may have come as no surprise that American holiday shoppers flocked to the firm’s many locations, pushing quarterly earnings beyond what had been previously expected by the markets. Compared to the figures for the final quarter of 2022, same-store sales within the United States jumped by over 8%. Online sales grew more than twice as fast over the same period.
Q4’s earnings per share (EPS) figure came in at $1.71, 20 cents above analyst predictions, on a total revenue of more than $164 billion. However, Walmart CFO John David Rainey’s has issued warnings that continued financial pressure on the average citizen could limit growth potential as we move farther into 2023, and the company’s shares have marked an over 0.2% drop in value since the beginning of the year, with a fall of nearly 4% since the earnings release. (Source:CNBC)
Target to Hit Bull’s Eye?
Retail industry peer Target (TGT) is set to release its Q4 earnings today, February 28th, before the ring of the opening bell. According to some predictions, the figures expected from Target’s report today may be somewhat mixed.
Continuing economic travails have many Americans focusing their spending on basic needs such as groceries rather than discretionary items. Moreover, potential customers may lack a perception of Target as a low-cost retailer, leading them to spend their money elsewhere.
Analyst predictions are for Q4 revenue to come in at just under $30.5 billion, with earnings per share turning out to be $1.48. While visits to Target’s brick and mortar stores outpaced those of Walmart in January, it’s estimated that year-over-year sales could fall by nearly three percent. Further pressures on Target’s bottom line could come in the form of continued excess inventory, despite the drive for clearance sales and price markdowns, as well as increasing wage pressures on payroll expenses as starting wages for the firm’s employees reach fifteen dollars per hour.
Despite these challenges, it seems that Target’s earnings report could provide as pleasant a surprise for traders as did Walmart last week. Target stock is up by just under 12% so far in 2023, but today’s earnings release as well as the guidance offered by the denizens of the firm’s executive suite could shift this trend over the course of the coming trading days.
Macy’s Faces Struggle
Big Apple-based retail giant Macy’s (M) is expected to report Q4 2022 earnings on March 2nd before the opening of the trading day. Given that the fourth quarter included the highly lucrative holiday season, this report could offer especially interesting data for investors and traders alike.
In comparison to peers in the retail industry, analyst predictions for Thursday’s release seem to be rather gloomy. While Q3’s earnings report outpaced expectations, it’s posited that Macy’s Q4 2022 earnings per share figure could decline by as much as 35% when compared to the fourth quarter of 2021.
Despite recovering nicely from the economic headwinds of the COVID-19 pandemic, Macy’s is still paying off a considerable amount of debt, with nearly 25% of the firm’s operating income going toward interest payments. Further, a mid-quarter drop in sales may have left a significant mark on Thursday’s release.
Macy’s stock is down by 1.2% since the beginning of February, and much of where the firm’s shares head next could rest on guidance for the quarters ahead.
Consumer behaviour has been one of the most closely-watched indicators of the health of the U.S. economy throughout the current period of high inflation. Whether retail giants’ earnings reports could shift the prevailing views regarding Americans’ shopping habits still remains to be fully ascertained.