Earnings season is set to continue this week with some of the biggest names in the American retail industry scheduled to release quarterly reports. The releases scheduled for the days ahead include Home Depot, Target, and Walmart. Investors may be able to get a better handle on how big-box retailers in the world’s largest economy are coping with the changing tides of the markets.
Home Depot Adapts
Home improvement giant Home Depot (HD) is expected to release Q2 2023 earnings on Tuesday, August 15th before the trading day begins. While this firm has been known to deliver earnings surprises in the past, it seems that most analysts foresee a year-over-year decline in key data points.
Home Depot’s earnings per share (EPS) figure is expected to come in at $4.46 on revenues of $42.2 billion. If these estimates are borne out, this would represent a decline of more than 11% in earnings per share and 3.5% in revenues when compared to the second quarter of 2022.
Some of this decline may be attributable to recent changes in Americans’ spending habits. According to data from the United States Bureau of Economic Analysis, furniture and home decorations have become ever more popular, while outdoor equipment has seen a double-digit decline in sales. Furthermore, tens of millions of Americans are ‘locked in’ to their homes. What this means is that due to the recent interest rate hikes by central banks, homeowners may be more wary of moving houses as new mortgages would cost significantly more than those entered into in the past. Therefore, money that may have gone toward remodeling of a new home is not being spent, potentially to Home Depot’s detriment.
Home Depot stock is up by more than 4.8% so far in 2023, despite the economic headwinds affecting diverse sectors of the American economy. Whether tomorrow’s earnings release will provide further optimism to traders remains to be seen.
Target & Walmart Diverge?
Joining the quarterly earnings party this week will also be two of the United States’ largest big-box retailers. Target (TGT) is scheduled to release Q2 2023 results on Wednesday, August 16th before market open, while Walmart (WMT) will follow suit with Q2 2024 earnings on Thursday, the 17th before the ring of the opening bell. Much ink has been spilled over Target in recent months, with the controversy surrounding the sale of LGBTQ+ Pride merchandise potentially contributing to the $15 billion drop in market capitalization observed in June for the company.
Target’s first-quarter earnings release on May 17th beat expectations, but it’s as yet unknown whether the company is in for a repeat performance. Estimates are for earnings per share to more than triple year-over-year to $1.43, but revenue is expected to slightly decline to $25.3 billion. Time will tell whether Wednesday’s release will help reverse some of the 12% drop in Target’s share price so far this year. (Source:Yahoo Finance)
On the other hand, analysts seem to have rosy predictions for Walmart’s quarterly earnings. Walmart shares have increased in value by over 13% so far this year, and estimates are for Thursday’s release to provide further good news to the markets.
Walmart is aggressively adapting to the changing nature of the retail marketplace, providing varied delivery options, including its Walmart+ subscription service, to compete with Amazon (AMZN) and Target. The retail giant is forging partnerships with digital native retailers and expanding its third-party marketplace. Additionally, Walmart's U.S. comparable sales increased by 6.6% in the past year, with its e-commerce segment growing by 12%. The company is innovating and investing in technology to stay competitive, particularly against Amazon. While earnings per share is expected to decline slightly to $1.69, revenue is expected to grow year-over-year to just under $160 billion.
All in all, different firms in the United States are reacting to economic trends with varying levels of success. This week’s retail releases could give the markets a lot to chew on.