Q4 Earnings Cycle Continues: Retail Results in Focus

Earnings Overview - The focus on earnings continues in the retail sector, with major companies like Target, Best Buy, and Costco set to report results this week [1] - Recent earnings releases indicate stable consumer spending trends, despite a slight pullback in consumer confidence [2] Consumer Spending Trends - Accumulated inflation has negatively impacted consumer spending, particularly among lower-income groups, leading to a focus on essentials rather than discretionary goods [3] - Spending on consumer durable goods has been weak, with expectations for confirmation of this trend in upcoming reports from Target and Best Buy [3] Company-Specific Insights - Target is expected to report earnings of $2.24 per share on revenues of$30.77 billion, reflecting year-over-year declines of -24.8% and -3.6% respectively, with same-store sales expected to rise by +1.2% [6] - Best Buy is projected to report EPS of $2.39 on revenues of$13.65 billion, representing year-over-year changes of -12.1% and -6.8%, with a decline in same-store sales expected at -1.54% [8] - Costco is anticipated to report earnings of $4.09 per share on revenues of$63.2 billion, showing year-over-year increases of +10.2% and +63.2% respectively, with strong growth expected to continue [14] Retail Sector Performance - The retail sector has seen a total Q4 earnings increase of +32.2% year-over-year among 26 retailers, with 73.1% beating EPS estimates [16] - The overall earnings growth in the retail sector is significantly influenced by Amazon, which reported a Q4 earnings increase of +86.9% [18][19] Future Outlook - Best Buy's revenues are expected to decline to $41.2 billion in 2024, down -5.1% from the previous year, but a growth in revenues is anticipated in the following year [11][12] - Costco's growth is supported by a loyal customer base and strong same-store sales, indicating a positive outlook for the company [13]