Big Retailers Still to Report Earnings. Here’s What You Need to Know -- ICYMI

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Most U.S. companies have reported earnings for the fourth quarter of 2019 and the outlook for 2020 isn’t bad, one factor bringing the broader market higher for the year so far.

For retail and apparel broadly, “with low unemployment and improving wage growth, the state of the U.S. consumer, in aggregate, has never been healthier,” wrote Morgan Stanley analyst Kimberly Greenberger in a note. “However, with the economy still late cycle and the tax and mortgage tailwinds now behind us, our U.S. equity strategy team is underweight the consumer discretionary sector. We see headwinds ahead.”

Many analysts are also expecting recently rising wages to negatively impact operating margins for retailers. Wage growth has trended at above 3% for the past several months recently. That margin compression has been likely reflected in profit expectations, analysts say.

Four big retail names are yet to report. Here’s what to watch for ahead of these reports:

Nike

Nike shares have trailed the broader market in 2020, up just 1.2%, against the S&P 500’s almost 5% gain. Nike reports on March 19.

Nike sees roughly 15% of its revenue from China, which is also an important growth market for the company.

Analysts are looking for revenue of $10.31 billion and adjusted earnings per share of 69 cents for the calendar year fourth quarter. While Nike has said it expects a “material” impact to results for 2020 given the coronavirus, the company hasn’t yet adjusted its forecast, creating some downside risk.

Nike also trades at 29 times forward earnings, above its 5-year average of 25, although many analysts say that’s justified, given the company’s higher growth and margin profile.

Canada Goose

Canada Goose is down 12% year-to-date.

Goose sees 7% of revenue from China, a market that’s expected to contribute to fast growth rates for the company in the future.

Management recently reduced 2020 revenue guidance to a range between $712 million and $719 million. It’s also looking for earnings per share of between $1 and $1.03.

Analysts are looking for quarterly revenue and loss per share of $100.5 million and 7 cents.

TJX and Burlington

Both these companies have almost zero sales exposure to China and source minimally from the country.

Analysts are looking for Burlington to post revenue and EPS for the quarter of $2.19 billion and $3.22.

For TJX, analysts see revenue and EPS coming in $11.82 billion and 77 cents.

They’re certainly not immune to compressed margins from wages, but Greenberger says both names “represent companies that we believe are competitively positioned, supported by solid management teams, and maintain clear, realistic, growth strategies, all of which could potentially ease broader 2020 EBIT pressure.”

Burlington is up 6% for the year, beating the broader market, while TJX has risen just 0.6%. 

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