America’s June quarter earning season slows this week, but retailers will dominate again, as they did last Thursday and Friday with weak figures from department store chains like Macy’s and especially JC Penny.
All up around 20 companies in the S&P 500 are due to report this week, led by the giant Walmart on Thursday. The reports will come the same week as the July retail sales data is released later in the week.
Walmart is expected to again outperform much of its retail competition as it spending heavy on logistics, its online offerings and new products. Investors will be also watching the performance of its huge US operation which is run by former Woolworths senior executive, Greg Foran.
On top of that America’s home-improvement giant Home Depot also reports and analysts are wondering if it can again avoid much of the retail sales and earnings pain.
The Number 2 US chain, Target is also due to report, along with luxury goods group, Coach.
The TJX Cos, America’s biggest seller of off-price clothing and homewares (it has three separate chains, the biggest being T.J. Maxx). It also operates in Canada, Germany and some parts of Europe and has just started in Australia as T.K. Maxx).
The Gap Inc, the US clothing and accessories chain is also due to report this week. Earlier this month OrotonGroup ended its joint venture in Australia with Gap.
Foot Locker, the US sports wear and shoes group is also due to report on Friday and on Thursday the struggling department store chain Bon Ton is expected to release weak figures. Ross Stories, another small chain is also due to report on Thursday and L Brands (Victoria’s Secret) is down to release on Wednesday.
And leading a group of non-retailers will be farm products group, Deere and Co which reports on Friday, with Staples, the office products company due to report on Thursday, and tech giant, Cisco on Wednesday.
While retail sales may have rebounded in July, US department stores haven’t been the biggest beneficiaries. Macy’s, Kohl’s and Dillard’s disappointed investors by noting that sales continued to fall last month (past their June 30 end of quarter date).
But while the shares of this chains fell, none received the drubbing that JC Penny did on Friday when it revealed worse than expected figures.
Its shares plunged 23% at one stage and closed the day off more than 16%. The shares are down more than 52% so far in 2017. Macy’s shares are down 42%
Penny said its net loss the three months to end of July widened to $US62 million worse than the $US56 million loss in the same quarter of 2016. Same store sales fell 1.3% in the quarter, the 4th quarter in a row that this important sales measure has been negative.
Looking at the season so far, S&P 500 companies are on track for 10% growth in the second quarter, mostly driven by the expected upturn in energy company sales and profits and the better than forecast performance by Apple, Alphabet (Google), Facebook, Netflix, and second tier stocks like Intel, Nvidia and AMD.
The only sector that is showing an earnings decline is consumer discretionary, which is being hurt by the slump in the retail sector as Amazon and other online operators eat sales growth.
