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Nov. 7, 2019, 10:55 a.m. EST

Will Consumer Confidence And Consumer Spending Be The Catalyst To Christmas Shopping Season? Analysts Await Insight

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By Benzinga.com

The waning weeks of earnings season are upon us, which means many major retailers are next in line to open their Q3 books.

As they lay out the goods, analysts will be looking for the impact of the “two Cs”—consumer spending and consumer confidence—on places known to clothe and feed those customers.

And, of course, retail earnings offer investors a chance to hear what big-box and department store executives’ expectations are for the coming weeks, the busiest shopping season of the year when holiday gift-giving is at its peak.

Maybe executives can provide more insight on early reports of solid holiday demand. Roughly 40% of consumers have already started shopping, the National Retail Federation reported recently. The NRF is predicting that retailers will ring up about 4% more in holiday sales during November and December than they did last year for a total approaching $730 billion.

Could the healthy consumer environment mean more people driving to malls and big box stores to shop at places like Macy’s Inc  /zigman2/quotes/201854387/composite M +2.53% and Kohl’s Corporation  /zigman2/quotes/210414114/composite KSS +2.98% that showed signs of struggle in the summer quarter? Retail earnings could provide a clue.

KSS saw same-store sales slide in Q2, but its recent partnership with Amazon.com, Inc.  /zigman2/quotes/210331248/composite AMZN +0.66% seemed off to a good start. We’ll see if that continued to provide some lift in Q3.

Macy’s had a really rough Q2 when it came to earnings per share, so the pressure could be on to show it had some improvement in Q3. Back in August, the company said it expected net sales to be about flat for the year, with same-store sales expected to be flat to up 1%. Any change in that guidance might get a close look from investors.

Consumer confidence and consumer spending are among the two leading indicators of retail earnings. The two usually go hand-in-hand. If confidence is strong, spending could be too. If spending dips, it might mean confidence is waning.

Of course, employment has a big hand in that too. When people are employed, they have the confidence to spend money. And guess what? All those factors have been relatively strong through most of this year, despite a few hiccups along the way.

Consumers are still opening their wallets, as seen in last week’s household spending data from the Commerce Department, up a seasonally adjusted 0.2% in September from August, though at a slower pace than a year ago.

Even when there are some signs slippage in sentiment, consumers are mostly working and still spending, according to Prosper Business Development, which tracks consumer-centric insights and analytics.

What they’re doing a lot of is spending carefully, researchers say. Or, in other words, buying on the cheap amid this shifting retail landscape. That’s why many analysts expect discount retailers like Walmart Inc  /zigman2/quotes/207374728/composite WMT +0.64% , Target Corporation  /zigman2/quotes/207799045/composite TGT +1.37% , Costco Wholesale Corporation  /zigman2/quotes/201191698/composite COST +0.69% , and Dollar Tree, Inc.  /zigman2/quotes/203712248/composite DLTR +1.15% to be among the biggest winners in the retail earnings game.

BIGInsights’ October monthly shopping strategy survey, for example, found that more than 60% of consumers say they usually buy clothing when it’s on sale, no matter what income level they’re at. Discounters push their low prices to value-seeking shoppers looking for deals.

That’s partially behind Moody’s Investor Services’ claim that discount and warehouse clubs, supermarkets, off-price and auto part retailers were some of the best performers in 2019, which the rating agency expects will continue to boost performance in 2020.

Many analysts look for that spending to be reflected in the last batch of quarterly earnings reports spilling out through the end of the month.

WMT’s earnings are expected to come out Thursday, Nov. 14, ahead of the market’s open. Though WMT stores certainly sell a number of everyday household goods at reduced prices, that’s not what many analysts say they will be looking for when WMT’s earnings are released.

/zigman2/quotes/201854387/composite
US : U.S.: NYSE
$ 15.71
+0.39 +2.53%
Volume: 20.07M
Dec. 12, 2019 4:10p
P/E Ratio
5.08
Dividend Yield
9.61%
Market Cap
$4.85 billion
Rev. per Employee
$197,992
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/zigman2/quotes/210414114/composite
US : U.S.: NYSE
$ 49.12
+1.42 +2.98%
Volume: 3.80M
Dec. 12, 2019 4:10p
P/E Ratio
11.29
Dividend Yield
5.46%
Market Cap
$7.47 billion
Rev. per Employee
$156,814
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,760.33
+11.61 +0.66%
Volume: 3.03M
Dec. 12, 2019 4:15p
P/E Ratio
77.94
Dividend Yield
N/A
Market Cap
$867.01 billion
Rev. per Employee
$359,671
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/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 119.76
+0.76 +0.64%
Volume: 4.15M
Dec. 12, 2019 4:10p
P/E Ratio
23.92
Dividend Yield
1.77%
Market Cap
$337.62 billion
Rev. per Employee
$223,654
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 127.52
+1.72 +1.37%
Volume: 3.60M
Dec. 12, 2019 4:10p
P/E Ratio
20.37
Dividend Yield
2.07%
Market Cap
$63.75 billion
Rev. per Employee
$209,322
loading...
/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 297.34
+2.04 +0.69%
Volume: 2.70M
Dec. 12, 2019 4:00p
P/E Ratio
35.98
Dividend Yield
0.87%
Market Cap
$130.46 billion
Rev. per Employee
$600,967
loading...
/zigman2/quotes/203712248/composite
US : U.S.: Nasdaq
$ 92.55
+1.05 +1.15%
Volume: 2.86M
Dec. 12, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$21.65 billion
Rev. per Employee
$129,604
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