Department Stores Disappoint Again – August 11, 2017

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The one-year stock price of Macy’s (M Free Report) and the department store industry chart vividly tells the story; these are tough times for the space. Macy’s shares have lost -48.2% of their value over the past 12 months, underperforming the Zacks Department Store industry’s -36.2% decline.

The green line in the chart shows Amazon’s performance over the same time period. Amazon is working on a number of fronts, but it has been a big contributor to the department store space’s ongoing pain. The issues are well known by now – these operators needed literally to reinvent their businesses to effectively operate in an environment where consumers are steadily shifting their spending dollars to the online medium instead of visiting the physical store.

As of Friday, August 11th, we now have Q2 results from 23 of the 42 retailers in the S&P 500 index. This week brings results from the big-box operators Wal-Mart (WMT Free Report) , Target (TGT Free Report) , Home Depot (HD Free Report) and others. Total earnings for the 23 retailers that have reported already are down -1.7% from the same period last year on +6.7% higher revenues, with 73.9% beating EPS estimates and 78.3% beating revenue estimates.

Please note that we have a stand-alone Retail sector, unlike the official Standard & Poor’s placement of this space in the Consumer Discretionary sector. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar retailers, the online vendors like Amazon and Priceline and restaurant operators. Results from the online vendors and most of the restaurant operators are already behind us at this stage.  

The side-by-side charts below compare the sector’s results thus far with what we have seen from the same group of 23 retailers in other recent periods.

The aggregate growth pace from the 23 retailers that have reported results already are tracking below what we had seen from the same companies in other recent periods. Positive surprises are as numerous in this sector as they have been all along in other sectors this earnings season. We will get Retail’s complete picture following this week’s results from Wal-Mart, Target, Home Depot and others.

Q2 Earnings Season Scorecard (as of Friday, August 11, 2017)
 
The Q2 earnings season has come to an end for 10 of the 16 Zacks sectors, with results from 456 S&P 500 members or 91.2% of the index’s total membership already out. Total earnings for these companies are up +10.8% from the same period last year on +5.8% higher revenues, with 74.3% beating EPS estimates and 68% beating revenue estimates.

The table below shows the current Q2 Scorecard

The charts below compare the Q2 results thus far from the 456 index members with what we had seen from the same group of companies in other recent periods.

As pointed out earlier, the proportion of companies beating revenue estimates is tracking above historical periods (right-hand chart). The earnings and revenue growth pace for these 456 companies is below what we had seen from the same sample of companies in Q1, but an improvement over other recent periods.

Here are the four takeaways from the results that have come out already.

First, the earnings and revenue growth pace has steadily gone up relative to pre-season expectations. Total Q2 earnings for the index are currently expected to be up +10.1% from the same period last year on +5.3% higher revenues.

Please note that the +10.1% growth rate is the blended growth rate; it combines the actual growth for the 456 S&P 500 members that have reported with estimates for the still-to-come 44 index members. At the start of the quarter, the expectation was for earnings growth of +7.9%, which came down as the quarter unfolded, reaching as low as +5.6% just ahead of the start of the reporting season.

The deceleration in Q2 earnings growth notwithstanding, the quarter’s earnings tally is on track to reach a new all-time quarterly record, surpassing the 2016 Q4 level, as you can see in the chart below. The chart below contrasts the estimated 2017 Q2 total of $293.8 billion with the actual earnings for the preceding four quarters and estimates for the following four periods.

This record isn’t expected to last very long, with each of the coming quarters expected to bring in ever bigger earnings tallies.

Second, an above-average proportion of companies are beating estimates, particularly revenue estimates. We typically don’t give this factor a lot of weight in evaluating or assessing an earnings season since we all know that management teams are experts in managing expectations. Even then, the trend emerging in the Q2 earnings season is noteworthy for two reasons. First, estimates for the quarter had not fallen by as much as had historically been the case. Second, the proportion of positive revenue surprises, a much harder variable to manipulate relative to earnings, is really off the chart.

The chart below shows the proportion of 456 S&P 500 members that have beaten both EPS and revenue estimates and how that compares to historical periods.

Third, Q2 growth is broad-based and not dependent on one or two sectors. There is strong growth contribution from the Finance, Technology and Energy sectors in Q2, but we have 13 of the 16 Zacks sectors on track to produce more earnings than the year-earlier period.

Fourth, estimates for the September quarter have started coming down, but the pace and magnitude of negative revisions compares favorably to other comparable periods. Total Q3 earnings are currently expected to be up +3.9% from the same period last year, down from +6.3% at the start of July. The chart below shows the evolution of Q3 growth expectations since the start of the period.

This is a reassuring start on the revisions front, but we will have to see if this trend will remain in place through the rest of this earnings season.

The chart below shoes Q2 earnings growth expectations contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, this growth pace is expected to continue through the rest of the year.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

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Here is a list of the 126 companies including 16 S&P 500 members reporting this week.

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
SYSCO CORP SYY 0.71 0.64 0.00% Monday BTO
AZUL SA AZUL 0.01 N/A N/A Monday BTO
CANADIAN SOLAR CSIQ -0.16 0.68 -900.00% Monday BTO
GALECTIN THERAP GALT -0.13 -0.2 0.00% Monday BTO
LIQTECH INTL LIQT -0.02 -0.01 25.00% Monday BTO
VASCULAR BIOGNC VBLT -0.17 -0.14 -11.76% Monday BTO
WIDEOPENWST INC WOW 0.09 N/A N/A Monday BTO
ASURE SOFTWARE ASUR 0.11 0.15 -166.67% Monday BTO
CEMTREX NEW CETX 0.12 0.16 -60.00% Monday BTO
ENSERVCO CORP ENSV N/A -0.06 100.00% Monday BTO
JD.COM INC-ADR JD 0.02 -0.03 260.00% Monday BTO
PLYMOUTH IND RE PLYM 0.29 N/A N/A Monday BTO
SORL AUTO PARTS SORL 0.33 0.37 140.00% Monday BTO
TECOGEN INC TGEN -0.02 -0.02 100.00% Monday BTO
URANIUM RES INC URRE -0.13 -0.75 15.38% Monday BTO
ELEVEN BIOTHERP EBIO N/A -0.33 N/A Monday BTO
TRANSGLOBE ENGY TGA -0.02 -0.16 0.00% Monday BTO
WESTPORT FUEL WPRT -0.15 -0.4 20.00% Monday AMC
ATENTO SA ATTO 0.14 0.13 112.50% Monday AMC
EXTREME NETWRKS EXTR 0.12 0.07 60.00% Monday AMC
FATE THERAPEUTC FATE -0.24 -0.29 -14.29% Monday AMC
SOLARIS OIL INF SOI 0.07 N/A N/A Monday AMC
ASTERIAS BIOTHR AST -0.18 -0.16 5.56% Monday AMC
CLEAN DIESEL CDTI -0.07 -0.13 -171.43% Monday AMC
CANCER GENETICS CGIX -0.16 -0.28 38.89% Monday AMC
EVOKE PHARMA EVOK -0.12 -0.41 6.67% Monday AMC
FUSION TELECOM FSNN -0.17 -0.2 4.17% Monday AMC
ATYR PHARMA INC LIFE -0.57 -0.65 -1.82% Monday AMC
LIMBACH HOLDNGS LMB 0.11 N/A -900.00% Monday AMC
MARRONE BIO INV MBII -0.21 -0.28 0.00% Monday AMC
ONCOCYTE CORP OCX -0.12 -0.1 -23.08% Monday AMC
SITO MOBILE LTD SITO -0.02 0.04 -75.00% Monday AMC
TEARLAB CORP TEAR -0.75 -1 -9.33% Monday AMC
VOXELJET AG-ADR VJET -0.1 -0.1 -16.67% Monday AMC
ACURA PHARMACT ACUR -0.11 -0.28 127.27% Monday AMC
SPHERE 3D CORP ANY -1.5 -2.25 42.86% Monday AMC
BRIDGELINE DGTL BLIN -0.1 -1 66.67% Monday AMC
BARFRESH FD GRP BRFH -0.02 -0.03 0.00% Monday AMC
CELLECTAR BIOSC CLRB N/A -0.49 -115.00% Monday AMC
CELSION CORP CLSN -1.1 -2.66 -33.33% Monday AMC
CUMULUS MEDIA CMLS 0.19 0.08 -737.50% Monday AMC
FAMOUS DAVES DAVE 0.09 0.17 -150.00% Monday AMC
DIGITAL ALLY IN DGLY -0.24 -0.54 0.00% Monday AMC
FLEXIBLE SOLTNS FSI 0.03 0.05 180.00% Monday AMC
GALENA BIOPHARM GALE -0.15 1.2 59.09% Monday AMC
GREAT ELM CAP C GECC 0.2 N/A N/A Monday AMC
HILL INTL INC HIL 0.01 0.03 -900.00% Monday AMC
HOLLYSYS AUTOMT HOLI 0.37 0.56 -33.33% Monday AMC
IMAGEWARE SYS IWSY -0.03 -0.03 -33.33% Monday AMC
MARATHON PATENT MARA -0.14 0.49 13.33% Monday AMC
NETSHOES CAYMAN NETS -0.23 N/A 80.14% Monday AMC
ONCONOVA THERAP ONTX -0.72 -1.96 N/A Monday AMC
PENGROWTH EGY PGH N/A -0.03 300.00% Monday AMC
SABESP -ADR SBS 0.25 0.33 52.94% Monday AMC
ONE GROUP HOSP STKS N/A -0.06 -100.00% Monday AMC
INNOVUS PHARMA INNV N/A -0.05 N/A Monday AMC
MYOMO INC MYO N/A N/A N/A Monday AMC
PARKERVISION PRKR N/A -0.72 N/A Monday AMC
SIERRA METALS SMTS N/A N/A N/A Monday AMC
PHOTRONICS INC PLAB 0.09 0.12 -40.00% Monday AMC
FORTUNA SILVER FSM 0.04 0.04 50.00% Monday AMC
ROMACO RESOURCS METC 0.05 N/A -266.67% Monday AMC
DIGILITI MONEY DGLT N/A N/A N/A Monday AMC
REPROS THERAPEU RPRX N/A -0.18 N/A Monday N/A
FUJIFILM HLDGS FUJIY 0.21 0.23 89.47% Monday N/A
HOME DEPOT HD 2.21 1.97 3.73% Tuesday BTO
TJX COS INC NEW TJX 0.84 0.84 3.80% Tuesday BTO
COACH INC COH 0.49 0.45 4.55% Tuesday BTO
ADVANCE AUTO PT AAP 1.65 1.9 -24.53% Tuesday BTO
EAGLE POINT CRD ECC 0.51 0.57 -3.70% Tuesday BTO
DICKS SPRTG GDS DKS 1.01 0.82 0.00% Tuesday BTO
SANCHEZ PRODUCT SNMP -0.44 -4.37 -85.71% Tuesday BTO
QIWI PLC-ADR QIWI 0.24 0.33 54.17% Tuesday BTO
AGILENT TECH A 0.52 0.49 20.83% Tuesday AMC
VIAVI SOLUTIONS VIAV 0.06 0.08 50.00% Tuesday AMC
JACK HENRY ASSC JKHY 0.83 1.06 6.94% Tuesday AMC
OBSEVA SA OBSV -0.48 N/A -41.46% Tuesday AMC
SOCIAL REALITY SRAX N/A 0.3 16.67% Tuesday AMC
WIDEPOINT CORP WYY -0.01 -0.01 0.00% Tuesday AMC
CATASYS INC CATS N/A -0.54 N/A Tuesday AMC
URBAN OUTFITTER URBN 0.38 0.66 -18.75% Tuesday AMC
TARGET CORP TGT 1.21 1.23 35.96% Wednesday BTO
PERFORMANCE FG PFGC 0.5 0.38 8.00% Wednesday BTO
POINTER TELOCAT PNTR 0.2 0.18 38.10% Wednesday BTO
CYREN LTD CYRN -0.05 -0.01 -20.00% Wednesday BTO
TOP IMAGE SYS TISA -0.08 0.01 -25.00% Wednesday BTO
ITURAN LOCATION ITRN N/A 0.36 N/A Wednesday BTO
MSG NETWORKS MSGN 0.51 0.57 -1.69% Wednesday BTO
ENZYMOTEC LTD ENZY 0.01 0.01 -100.00% Wednesday BTO
NETAPP INC NTAP 0.42 0.28 5.88% Wednesday AMC
CISCO SYSTEMS CSCO 0.55 0.58 1.89% Wednesday AMC
L BRANDS INC LB 0.45 0.7 13.79% Wednesday AMC
CACI INTL A CACI 1.64 1.75 11.03% Wednesday AMC
BRIGGS & STRATT BGG 0.51 0.46 2.47% Wednesday AMC
SPARTAN NASH CO SPTN 0.6 0.58 3.77% Wednesday AMC
IMMUNOMEDICS IMMU -0.11 -0.17 -69.23% Wednesday AMC
VIPSHOP HOLDNGS VIPS 0.14 0.13 -6.25% Wednesday AMC
GEOPARK LTD GPRK 0.04 -0.02 225.00% Wednesday AMC
WAL-MART STORES WMT 1.06 1.07 4.17% Thursday BTO
CHINA LODGING HTHT N/A 0.67 50.00% Thursday BTO
ALIBABA GROUP BABA 0.73 0.52 -17.02% Thursday BTO
SWISSCOM AG ADR SCMWY N/A 0.84 N/A Thursday BTO
MADISON SQUAR-A MSG -1.1 -2.11 -54.17% Thursday BTO
CHINA RAPID FIN XRF -0.17 N/A N/A Thursday BTO
LANCASTER COLON LANC 1.17 1.12 -12.84% Thursday BTO
STAGE STORES SSI -0.04 0.03 19.12% Thursday BTO
BUCKLE INC BKE 0.22 0.32 6.25% Thursday BTO
LSI INDUSTRIES LYTS 0.03 0.06 -75.00% Thursday BTO
GOLD FIELDS-ADR GFI N/A N/A N/A Thursday BTO
HARMONY GOLD HMY N/A N/A N/A Thursday BTO
GAP INC GPS 0.52 0.6 24.14% Thursday AMC
APPLD MATLS INC AMAT 0.83 0.5 3.95% Thursday AMC
ROSS STORES ROST 0.76 0.71 3.80% Thursday AMC
SPORTSMANS WRHS SPWH 0.13 0.2 -14.29% Thursday AMC
ADTELUM GBL EDU ATGE 0.72 0.65 9.38% Thursday AMC
LATAM AIRLINES LTM -0.03 -0.17 -21.43% Thursday AMC
ABSOLUTE SOFTWR ALSWF 0 N/A 50.00% Thursday AMC
ZOES KITCHEN ZOES 0.02 0.06 0.00% Thursday AMC
GLOBANT SA GLOB 0.26 0.25 0.00% Thursday AMC
AMERICAS CAR-MT CRMT 0.9 0.87 12.50% Thursday AMC
ESTEE LAUDER EL 0.42 0.43 24.66% Friday BTO
DEERE & CO DE 1.88 1.55 46.47% Friday BTO
ASCENDIS PHARMA ASND -0.78 -0.6 -29.69% Friday BTO
HIBBET SPORTS HIBB -0.2 0.29 1.04% Friday BTO
BANCOLOMBIA-ADR CIB 1 1.03 0.00% Friday AMC
SPARK NEW ZEALD SPKKY N/A N/A N/A Friday N/A

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