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M&A, CEO shakeups, full-year guidance pulled...drama unfolds within retail
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We profile four recent earnings pre-announcements, while NVIDIA reports numbers Wednesday night, and key macro data comes Friday
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Executives and investors continue to wade through murky waters with the second half in sight
Retailers, like much of the broader market, have reported better-than-expected Q1 earnings. Yes, there have been troublemakers like Target Corporation (NYSE:TGT) and America Eagle (AEO), but Walmart (NYSE:WMT), TJX Companies (NYSE:TJX), and Home Depot (NYSE:HD) didn’t point to an immediate severe consumer-spending slowdown.
What’s more, the April Retail Sales report, while slightly below estimates, showed there remains a gap between what folks say and what they do. There’s even M&A activity within the retail space that offers hope for a strong second half of 2025...if trade policy trends improve.
As it stands, now is a critical time for consumer companies as they load up ahead of the back-to-school season and put in orders for the winter holidays. Q2 could also be retail’s first negative year-on-year earnings change since the throes of the pandemic, due in part to potential tariff impairments.
The Password Is: Uncertainty
To be clear, there is not much clarity. The balance of the year is clouded with uncertainty on the trade front, with tax policy, and whether the labor market will hold up as US real GDP growth likely eases. Our team caught those vibes when scanning earnings data—not the top- and bottom-line numbers themselves, but via a slew of preliminary earnings announcements among well-known retail firms.
For background, earnings pre-announcements may offer clues on future company trends. A news release ahead of a scheduled quarterly announcement might feature updated guidance, while a soft forecast and a lowered expected sales or profit range could be seen as a red flag. Preliminary earnings make the full report, often issued weeks later, all the more pivotal.
NVIDIA Earnings on Tap
This week, along with NVIDIA Corporation (NASDAQ:NVDA)’s Q1 release Wednesday night, investors will hear from a handful of small companies within the Consumer Discretionary sector that have preannounced, mainly calling out softer trends or more subdued forecasts in light of myriad macro and firm-specific factors. It’s not all dour news, though.
Source: Wall Street Horizon
Kicking Up a Retail Deal
Dick’s Sporting Goods Inc (F:DKS) checked into the Q1 reporting game with solid numbers to begin 2025. On May 15, the $14 billion market cap omnichannel sporting goods retailer issued preliminary Q1 results that featured impressive comp-store sales growth of 4.5% on earnings per diluted share of $3.24. Lauren Hobart, President and Chief Executive Officer, said, "We are very pleased with our strong start to the year and our demonstrated sustained growth.”
Shares backpedaled, however, as investors punted on the news that DKS would acquire Foot Locker (NYSE:FL) for $2.4 billion. FL soared more than 80% in response, but DKS dropped 15%. Dick’s full Q1 report hits the tape Wednesday morning with a conference call immediately after.
More Preliminary Earnings in the Spotlight
All eyes are on NVIDIA Wednesday night, but Thursday’s earnings docket includes retail companies that previously signaled numbers to the street. Let’s profile three of them.
Bath & Body Works (BBWI)
On May 19, the Ohio-based retailer put out a press release confirming Daniel Heaf will take over as CEO as Gina Bowell steps down. Sometimes, when a new CEO assumes the helm, a so-called “kitchen-sink” quarterly report might come out with struggling companies. Of course, we don’t know if such a tape bomb is imminent. Bath & Body Works Inc. (NYSE:BBWI) is already down 36% over the last year, but Piper Sandler, Morgan Stanley (NYSE:MS), and Citigroup (NYSE:C) have all published upbeat research on the company.
Investors haven’t sniffed out a BBWI turnaround yet. We’ll see what this week’s full Q1 report includes, but the pre-announcement noted Q1 sales “at the high end of the guidance range,” while assuming a 10% tariff on goods imported from China.
Kohl’s (KSS)
On May 1, Kohl’s Corp (NYSE:KSS)’s announced it was terminating its CEO Ashley Buchanan with cause. The embattled Broadline Retail company, now valued at less than $1 billion in equity market cap, named Michael Bender as interim CEO. An outside investigation had revealed that the disgraced CEO violated company policies by directing the Company to engage in vendor transactions that involved undisclosed conflicts of interest.4
Shares actually rose the day the news broke, but KSS has been a kiss of death for the bulls, with the stock down from above $80 in 2018 to below $8 today. Recall in March that Kohl’s planned 27 additional store closures as part of a turnaround plan—we may hear updates about that on Thursday. Within the preliminary, the management team cited a 4% to 4.3% expected comp-store sales drop year-on-year, with diluted EPS in the range of ($0.24) to ($0.20).
American Eagle Outfitters
You won’t find exceptionalism at American Eagle Outfitters Inc (NYSE:AEO) today. The stock is off by more than 50% over the past 12 months, and while names like The Gap (GAP) and Urban Outfitters (NASDAQ:URBN) have soared, AEO has been a stylish stock...for the short sellers. On May 13, the Pittsburgh-based Apparel Retail industry company issued preliminary earnings that included a large inventory write-down to “better align with demand trends.”
Q1 revenue is expected to be approximately $1.1 billion, which would be about -5% from a year ago. Management expects a GAAP operating loss near -$85 million. Shares dropped 6% in the session that followed, but AEO ended off the lows. Now under $11, it’s near a multi-year low ahead of the full Q1 report Thursday night. American Eagle (along with Ross Stores (NASDAQ:ROST) and Deckers Outdoor (NYSE:DECK)) also withdrew its FY 2025 guidance due to macro uncertainty.
Looking Ahead
Beyond earnings news, we’ll get key inflation data this Friday. According to Wall Street Horizon data, the April Personal Consumption Expenditure (PCE) Price Index crosses the wires before the bell on the 30th, along with last month’s Personal Income and Outlays data. Next (LON:NXT) week’s macro calendar is active, with key Purchasing Manufacturing Index (PMI) figures from the Institute for Supply Management (ISM), and the May nonfarm payrolls survey Friday morning.
Also keep your eye out for volatility in the crypto market—Vice President Vance is set to speak at Bitcoin 2025 in Las Vegas on Wednesday just as the token notches new all-time highs.
The Bottom Line
Tariffs, uncertainty, and unknowns about the consumer best describe Q1 retail reports and preliminary announcements this month. Still, the hard numbers have generally exceeded analysts’ expectations, and major indexes have recovered sharply from the April lows. This week’s slate of Q1 reports should offer further insights into the health of the consumer, and important macro updates will help paint the true picture as we head into the first half’s close.