Of the 76 companies in the Same Store Sales index, 49 have reported 1Q 2014 Same Store Sales results. Of these, 45% exceeded their SSS estimates, 2% match, while 53% missed them. The bulk of retailers are also missing Q1 2014 earnings, and revenue expectations. However, it’s important to note that they are still posting positive growth compared to a year-ago. This reinforces that despite really bad weather, retailers still managed to see improvement and growth in their business trends.
Exhibit 1: Retail EPS, Revenue, and Same Store Sales – Week of May 19, 2014
Q1 2014 Scorecard
Consumers recently refinanced their homes and purchased items they believe will increase the value of their homes at the home improvement and furnishing stores. Williams Sonoma smashed Q1 2014 Same Store Sales expectations of 5.6%, with a robust 10% comp. Still, Tiffany’s is on top with an 11% SSS, above its 4.3% SSS estimate, thanks to sales in the Asian Pacific region.
Exhibit 2: Same Store Sales Winners and Losers – 1Q 2014
The companies below posted the strongest growth rates this earnings season within the S&P 500 Consumer Staples and Discretionary sectors. It is evident from the list that the bad weather kept shoppers at home, shopping online, encouraging them to get a Netflix subscription, buy groceries, and drinks to enhance the stay-at-home experience.
Exhibit 3: Earnings Growth Rates – 1Q 2014
Meanwhile, the low-end consumer is being hit by unemployment, higher payroll taxes, health care expenses, and loss of food stamp programs. As a result, they continue to trade down, and discounters have been losing market share to dollar stores. Accordingly, Dollar Tree Inc. reported first quarter results today, and said “”Our first quarter sales grew as the result of increases in both traffic and average ticket with our discretionary business growing slightly faster than consumables,” (Source: DLTR release, 5/22/14).
Meanwhile, the middle-class consumer has become increasingly price-oriented, and value driven. Now they are going online and shopping on Amazon for consumer staples, vs. Walmart and Target in the past. Still, due to the uncertainty in the economy, retailers are lowering second quarter earnings guidance. To date, we have received 31 negative guidance, and only 2 positive. As a result, analysts have become bearish and started lowering earnings and Same Store Sales projections for the second quarter.
On the flip side, there is positive news, several retailers mentioned mall traffic improvement going into the second quarter. And, despite missing on earnings, and revenue, retailers are still seeing positive earnings growth suggesting business trends are improving. Finally, consumers received their tax refunds and have money in their pockets and might want to spend it now that beautiful weather has arrived.
Receive stories like this to your inbox as they are published. Subscribe here and follow us @Alpha_Now on Twitter. If you are looking to access Thomson Reuters data or analytics, register for a free trial.