The Retailers Are up: Barbie and Back-To-School Will Dominate Final Q2 Reports

 | Aug 14, 2023 20:57

  • The LERI shows Q2 2023 ended with the highest level of corporate uncertainty in the last year

  • Retail in the spotlight this week: HD, TGT, TJX, WMT, ROST

  • Upcoming potential surprise: Salesforce

  • This week 1,1190 companies will release results for Q2

    • With Q2 2023 peak earnings season in the rearview, the final round of company reports to watch will mainly come from the retailers, results from which are greatly anticipated. Certain indicators show the US consumer softening, but some retailers have reported record sales this quarter. Last week’s report from the Federal Reserve Bank of New York showed that Americans are going further into debt to make purchases, with credit card debt hitting $1 trillion for the first time ever. While that figure may look shocking, it’s mostly unremarkable in that it puts consumer spending in line with historic, pre-pandemic levels. As to exactly how the US consumer is currently faring, that should be made clear after these next couple of weeks of retail reports.

    At this point, 91% of S&P 500 companies have reported for Q2. And while results have been okay, with roughly 80% of companies beating Wall Street EPS expectations, the main driver of positive earnings surprises has been cost cutting, not revenue growth. With low revenue expectations of 1.3% for Q3 (according to FactSet), companies are going to have to keep cutting their way to bottom-line growth in H2 2023 and beyond.

    The Final Q2 LERI Reading Still Shows Uneasiness from US Corporations /h2

    When we entered this quarter’s earnings season, our proprietary Late Earnings Report Index (LERI) was showing that CEOs were more uncertain than they had been in recent quarters. In fact, they were about as uncertain as they’ve been since the pandemic. This reading was calculated on July 14, the day many major banks began to report. Now that the season is over, we’ve updated the LERI again for the post-peak season, and it tells much of the same story.

    The Late Earnings Report Index tracks outlier earnings date changes among publicly traded companies with market capitalizations of $250M and higher. The LERI has a baseline reading of 100, anything above that indicates companies are feeling uncertain about their current and short-term prospects. A LERI reading under 100 suggests companies feel they have a pretty good crystal ball for the near term.

    The current post-peak season LERI reading stands at 126, the second highest reading since the COVID-19 pandemic, only outdone by the Q2 2022 earnings season. As of August 11, there were 120 late outliers and 86 early outliers.