Last week offered mixed messages about whether an economic recovery is indeed underway. The unemployment figures were not as bad as feared, but July sales numbers were nothing to write home about, despite the wild popularity of the so-called cash-for-clunkers program.
The question is, where has consumer confidence (and consumer spending) been? Retail is a good place to look, and as it turns out, this week several shopping mall and strip mall favorites will be reporting earnings for the most recent quarter.
Analysts surveyed by Thomson Reuters are optimistic about Advance Auto Parts Inc. (NYSE: AAP), the nation's number two auto parts retailer. Its second-quarter profit is expected to be 4.8% higher than a year ago, or $0.83 per share. Revenue for the quarter is expected to be 6.4% higher, or $1.3 billion. For the full year, the forecast so far is for $2.99 per share (+8.0%) on $5.4 billion (+5.6%). Earnings of the Roanoke, Va.-based company have topped expectations in recent quarters, by as much as 13 cents per share. The long-term EPS growth forecast is 13.0%, which is better than the retail industry average, and about the same as larger rival AutoZone Inc. (NYSE: AZO). Advance's earnings multiple is 14x, and this dividend-paying company has reported increasing cash flow from operations over the past few quarters. The First Call consensus recommendation is to buy AAP; TheStreet.com considers it a top stock. Shares are still trading near the multiyear high of $47.41 from the end of July.
On the other hand, in the second-quarter in which Walmart Stores Inc. (NYSE: WMT) revamped the electronics section of its stores and announced a share buyback program, the Bentonville, Ark.-based retail giant is expected to report earnings of $0.86 per share, the same as a year ago. Revenue for the quarter is expected to be marginally higher, or $103.1 billion. The full year forecast, though, is for earnings up 3.9% from a year ago to $3.56 per share on revenue of $413.5 billion (+1.9%). Walmart's earnings have met or beat expectations in recent quarters. The long-term EPS growth forecast is 11.9%, which is also better than the retail industry average. Its forward PE ratio estimate is 13.0. Walmart's board approved an increase in its annual dividend earlier this year. The consensus recommendation remains to buy WMT; the Motley Fool likes it for its growth potential. At $49.29, shares are a little higher than the 52-week low of $46.25 back in February. The share price is down 12.1% year to date.
Kohls Corp. (NYSE: KSS) is one of several retailers expected to report marginally lower earnings this week -- others include Fossil Inc. (NASDAQ: FOSL), Sara Lee Corp. (NYSE: SLE), and Urban Outfitters Inc. (NASDAQ: URBN). Results could still please investors if they include an upside surprise and/or optimistic guidance. Kohls' second-quarter profit is expected to be four cents per share less than a year ago to $0.73, which is in line with recent guidance. Revenue is expected to be $3.8 billion, which up 1.3% from a year ago. For the third quarter, analysts so far expect the profit to fall to $0.47 per share but for revenue to rise to $3.9 billion. Earnings of the Wisconsin-based discount department store operator have topped expectations in recent quarters, by as much as seven cents per share. The long-term EPS growth forecast is 14.3%, which is better than rival Target Corp. (NYSE: TGT). But its earnings multiple is 18x, also higher than that of Target. Cash flow from operations has grown over the past few quarters. Analysts, on average, recommend buying KSS, and have for more than 90 days. Shares are up 21.9% in the past three months and are creeping up on the 52-week high of $56.00 from last September.
Second-quarter earnings declines are expected to be greater for Nordstrom Inc. (NYSE: JWN), Red Robin Gourmet Burgers Inc. (NASDAQ: RRGB), and especially for Macy's Inc. (NYSE: M). Analysts expect Macy's to post earnings of $0.12 per share, down 58.6% from a year ago. Sales are expected to have diminished as well, 9.1% to $5.2 billion. And in the third quarter, the forecast is for a per-share loss and a further decline in revenue. But results have been better than expected in recent quarters, beating estimates by as much as 11 cents per share. The long-term EPS growth forecast is 9.5%, which is in the same neighborhood as that of Nordstrom, but Macy's earnings multiple is 20x. Macy's declared a quarterly dividend in May. The consensus recommendation shifted from buy to hold Macy's in the past quarter, but BusinessWeek featured it as a bargain, if the economy begins recovery. Shares have raced upward 49.6% in the past month to $15.99 but are still 22.9% lower than a year ago.
Analysts expect Abercrombie & Fitch Co. (NYSE: ANF), Ethan Allen Interiors Inc. (NYSE: ETH), and JCPenney Co. (NYSE: JCP) to report that they swung to losses from year-ago profits. For a second quarter during which its president stepped down, JCPenney is expected to post a net loss of $0.03 per share on sales of $3.9 billion, compared to a profit of $0.52 and $4.3 billion in the same quarter of last year. For the full year, the forecast is for a profit of $0.87 per share (-65.5%) and revenue of $17.5 billion (-5.2%). Earnings of this dividend-paying company have beat expectations by a penny or two per share in recent quarters. The long-term EPS growth forecast is 10.3%, which is better than rival Macy's. Cash flow from operations swung to positive territory in the previous quarter. The consensus recommendation is to buy JCP; Jim Cramer preferred it to the Gap Inc. (NYSE: GPS). At $34.43, shares are 12.9% higher than three months ago, but 3.7% lower than a year ago.
Blockbuster Inc. (NYSE: BBI) is expected to report a loss for its second quarter as well, but a narrower one. Analysts are looking for the world's largest video rental chain to report a loss of $0.12 per share and revenue of $1.1 billion, compared to a loss of $0.23 and sales of $1.3 billion in the same period of last year. Analysts so far expect to see a profit of $0.18 per share for the full year, as well as $4.7 billion is sales (-11.8%). But the Dallas-based company has fallen short of expectations in three of the past four quarters, and the long-term EPS growth forecast is 15.0%, which is less than that of rival NetFlix Inc. (NASDAQ: NFLX). Cash flow from operations was still in negative territory at last report. Yet short interest was down over the past month and the consensus recommendation remains to buy BBI. At $0.92, shares are well off the 52-week high of $3.05 from last September, but have risen 50.8% in the past month.
For a more up-to-date look at consumer sentiment, watch for the TIPP Economic Optimism Index for August and the preliminary University of Michigan Consumer Sentiment Index for August, both due out this week.











Reader Comments (Page 1 of 1)
8-09-2009 @ 3:58PM
Bothepro24 said...
This week and next week are not good weeks to get a feel relative to retail figures. Many states are in the midst of tax free days for back to school purchases. Clothing for kids back to school is as important as food on the table. But the tax savings along allow the consumer from 5-8% more money to pay. I don't think you'll sales of appliances and such up.
8-09-2009 @ 4:23PM
Jake Bello said...
My oh my, what a difference having an administration the "corrupt media" adores can make. When Bush had 4% unemployment and every economic indicator was positive and then some, the "corrupt media" was doing stories on the homeless and others who weren't living in ways that reflected what the rest of 99.9% of the population was. Now, they're doing cartwheels because only a quarter of a million Americans lost their jobs last month. That's on top of the millions that have lost their jobs since the beginning of the year and which "The Messiah" said would be avoided if we hurried up and passed his "stimulus" package. Neither the "corrupt mrdia" nor "Our Dear Leader" will talk this economy into recovery. They won't BS it into recovery either.
8-09-2009 @ 4:52PM
1080p said...
Depression is on the way thanks to Obama.
8-09-2009 @ 6:46PM
paparcl said...
Retailers will show a marked improvement because it is back to school shopping for a couple of weeks. Then when everybody is back to school and done for the summer traveling it will be back to the recession and the stock market will plunge, oil prices will fall to a new level and unemployment will level off because companies have cut their employees to the bone to show a profit.
8-09-2009 @ 7:49PM
Dan said...
Etna went around a few years ago and started buying up their competition and when they found out some of them were providing decent health care at an affordable price, in other words making a decent profit and providing healthcare at a decent price, they found out they weren't making enough money to keep their share holders happy. So what did they do? They cast out 8 million customers, which provided them the profit margin needed to keep their investors, hedge fund managers happy. Do we need a single payer health care? Yes we do. See the movie Sicko. Go to pbs.org Bill Moyers journal, Wendell Potter interview.
8-09-2009 @ 8:11PM
Jake Bello said...
The only mixed messages from the economy last week were rooted in how the "corrupt media" and others who can only evaluate from a political perspective choose to interpret the data. You don't lose almost an additional quarter of a million jobs in one month and announce it was better than expected so it must be an indicator of possible economic recovery. This is especially true if you understand how the numbers are obtained in the first place. Only people who currently have jobs or are ACTIVELY LOOKING for jobs are included in the totals. That means that people who have, for at least the time being, have given up on looking for jobs that aren't currently available, DON'T GET COUNTED AS BEING PART OF THE UNEMPLOYED. I believe that's called "government think"! Only they could consider an unemployed person not to be an unemployed person if they don't meet some pencil pushers criterion. Even if the NEWLY unemployed percentage was suddenly at zero, that would not be providing any new additional jobs for the millions who have lost their jobs since just the beginning of this year. The "corrupt media" and "Our Dear Leared" must come to temr with the fact that this economy won't be talked into a recovery or job creation. Try proven policies that have always worked, for a change.
8-09-2009 @ 8:52PM
texgirl said...
YOU CONSERVATIVES ARE AMAZING. YOU SEEM TO FORGET HOW THINGS ACTUALLY WERE UNDER BUSH: HE CUT TAXES ON THE WEALTHY, BLEW THRU THE CLINTON SURPLUSES,BORROWED MORE $ THAN ALL PREV. PRES. combined ( including a trillion & from China), DOUBLED THE NAT'L DEBT TO $10 TRILLION DOLLARS, LAUNCHED A WAR OF CHOICE -- W/ NO EXIT PLAN -- @ A COST OF $12BILLION A MO., & A TRILLION $ "SOCIALIST" DRUG PROGRAM FOR SRs,& A $190Billion "SOCIALIST" FARM SUBs. PROGRAM, & A $85Billion BAILOUT FOR AIG, & A $750Billion BAILOUT FOR THE BANKS. THAT HE FAILED VETO one SPENDING BILL IN 6 YRS, OR TO INTERVENE IN THE SUB-PRIME CRISIS, & PRESIDED OVER A 20% DROP IN PROP. VALUES, THE CRASH OF THE DOW FROM 14K-8K, THE LOSS OF 2.6 MILLION JOBS IN 2008...1.9M. OF THEM IN THE LAST 4 MO. OF HIS TERM ( THE PUSH BEHIND A DOMINO EFFECT OF JOB LOSSES THAT CONTINUE TO THIS DAY). BUT, YOU WANT TO BLAME OBAMA'S 6 MO. OLD PRESIDENCY FOR THIS ECONOMY. Please.
8-10-2009 @ 8:56AM
Margaret G said...
My oh my, this media gives me a migraine headache. They are trying sooooooo hard to soft soap the public with the idea that this stinking economy is getting better. Nothing would do until they got George Bush out of office. Now their "savior" is in office and I see NO IMPROVEMENTS AT ALL. Media, why don't you quit your tactics of patronizing your "favorite son" and admit the truth. It is just as bad now as when President Bush was in, maybe even worse. This is the Great Depression all over again and remember from the history books that the "Great D" lasted about 12 years. What's your guess on this timeframe?
8-10-2009 @ 10:14AM
MrDoughnut said...
In order to report better earnings at the stores jobs will have to be created . Which ever areas lacks consumers with jobs those areas will suffer.
Seasonal sales come every season but regular everyday sales occur through out the year regardless of the season so steady sales increases are necessary.
People need several weeks of employment before they feel secure enough to start spending again. Few are going to spend much until they feel the economy is getting better.
8-10-2009 @ 10:27AM
MrDoughnut said...
After the 1987 stock crash the 1990's job market was a roller coaster of ups and downs. Mergers,aquisitions, and outsourcing brought the Tech Bubble and Housing blow out inthe 2000's. The jobs never returned or were replaced by other good paying jobs causing the further economic problems.
The problem is good jobs must be created not fraud loan driven jobs that float the economy until the crap hits the fan. Only good paying jobs for Americans will turn the economy around. Imported labor and exported jobs do nothing to help the American's economy!
8-10-2009 @ 10:31AM
ettucat said...
Dan........I watched Sicko and was impressed. Of course, we do know which way M Moore leans, and so it is good to get another perspective. Watch pjtv.com to see another side. Done by amateurs, so you don't get the great camera work and sound as you do in a MM production, but you will at least have another point of view to mull over.
8-10-2009 @ 10:32AM
ettucat said...
Brothepro24..........I agree. This is back to school time, and there will undoubtedly be an upward blip in some retailers numbers. Don't believe it will last long though.
8-10-2009 @ 10:37AM
MrDoughnut said...
Too much focus was placed on a Global economy but the concern targeted only low wage countries for their cheap labor. Exporting jobs to and Importing workers from low wage countries brought down the economy of the USA and Europe.
8-10-2009 @ 11:01AM
garbanzai said...
This week's earnings reports are for periods ending in June or July. Back-to-school has nothing to do with it. You'll have to wait for earnings reports in October for that.