Winners And Losers In Retail Earnings

The retail landscape is long, twisted and complex. As it has seen its fair share of ups and downs over the last decade, 2017 is shaping up to be one of the more pivotal points in retail history. One of the clearest ways in which industry experts can measure the temperature is to take a review of the retail barometer known as quarterly earnings.

As reported by several retailers over the past few weeks, the industry is sharing different story angles. From Amazon buying Whole Foods for $13.7 billion to several stores closing down due to bankruptcies, there have been a lot of factors impacting retailers’ bottom lines and thus the retail corner of the stock market. While there was a total of 18 retail bankruptcies for the entire year of 2016, this year saw 14 by the end of May. Given this rapid advancement of retailers making the tough choice to file for bankruptcy, several thousands of department stores have shut their doors.

This past Thursday, we saw Kohl’s, Macy's and Dillard’s report quarterly earnings, and all three took a bit of a hit. While Kohl’s went down 6 percent and Macy’s saw a decrease of 9 percent, Dillard’s took a dive of more than 14 percent. Meanwhile, Nordstrom came in strong with a 3 percent increase after the closing bell. Although Nordstrom may have shined a ray of hope for retailers, overall earnings in the industry took a turn for the worst after Macy’s reported its downward turn.

One thing is for certain: Analysts are hopeful for the future of retail, as Jeffries’ Randal Konik pointed to Macy’s long-term plans, but desires for a quicker return on value are knocking hard on the door. “We appreciate management’s [long-term] initiatives to drive the business, including marketing, merchandising, omni capabilities and real estate monetization, but near-term fundamentals matter most to us, which are challenged with declining comps and deteriorating margins,” said Konik.

As department store retailers are playing the long game, Wall Street is looking for more immediate answers. Whether or not retailers are able to answer the analysts’ call is up in the air at the moment. While eCommerce has had a profound impact on shopping and the entire retail industry, merchants are just scratching the surface in terms of what can be done to enhance the overall in-store experience. By integrating more technology, retailers are hoping to catch up to the likes of eCommerce giants like Amazon.

It’s hard to avoid speaking about retail quarterly earnings without mentioning Jeff Bezos’ company, which seems to be both leading the pack and worrying retail executives. Reuters is reporting news that out of 130 earnings calls thus far this quarter, Amazon has been brought up on every single conversation.

Nuveen Asset Management’s Chief Equity Strategist, Bob Doll, commented to Reuters about the ever-present acknowledgement and impact of Amazon on the retail industry itself: “Expectations have been pushed down because a lot of retailers, particularly the [brick]-and-mortar ones, have had problems — Amazon and other related [issues] — so expectations are pretty low,” said Doll. “Amazon obviously has a very powerful model, but on the other hand, they’re not going to put every brick-and-mortar retailer out of business. These guys aren’t going to sit and let it happen.”

So far, Amazon has not had a major impact on the grocery part of the retail industry, as we reported 83 percent of U.S. adults shop at brick-and-mortar locations once per week, while 4 percent make purchases for their pantry online. And while there are a fair share of consumers who do shop online frequently, there is still a large group of people who prefer shopping in a physical location. According to our reporting from last week, 92 percent of all grocery shopping takes place offline.

Although everything in the retail arena seems a bit gloomy at this time, mall owners in particular are remaining positive about the future of retail. This may be due in part to the reshaping of malls following the departure of many larger anchor department stores. Malls are turning these empty spaces into restaurants and entertainment places instead of replacing them with another big brand.

While the retail quarterly earnings report has shown more losers than winners this week, industry news is pointing itself toward a retail revolution, which may be happening at a much slower pace than analysts like.



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