Projected Retail Q3 Earnings Up Sharply, Q4 Looks Even Better

As third quarter earnings results continue to pour in, overall earnings have been decidedly weaker. According to research firm Retail Metrics, the blended S&P 500 earnings growth rate for the third quarter of 2012 is currently a negative 0.5%, which - if it hold - would be the first quarterly earnings decline for the S&P since the third quarter of 2009.

Retail earnings, however, are projected to grow by 8.7% in the third quarter, up from 6.6% in the third quarter of last year. Excluding the 600-pound gorilla, aka Wal-Mart Stores Inc. (NYSE: WMT), retail sales are projected to grow by 8.1%.

Among retailers that have reported results so far this week, Office Depot Inc. (NYSE: ODP) posted 100% earnings growth year-over-year, CVS Caremark Corp. (NYSE: CVS) was up 15.%, OfficeMax Inc. (NYSE: OMX) was up 9.3%, and Macy's Inc. (NYSE: M) was up 6.3%.

There are a couple of dead weights coming this week too: J.C. Penney Co. Inc. (NYSE: JCP) is expected to report a decline of 145.5% in earnings, while Advance Auto Parts Inc. (NYSE: AAP) is expected post a drop of 13.5%. Kohl's Corp. (NYSE: KSS) is expected to show earnings growth of 8.8% year-over-year, and Nordstrom Inc. (NYSE: JWN) is expected to post growth of 22%.

According to Retail Metrics, 41 of the 120 retailers it tracks for its index (34%) have already reported quarterly results up a composite 10.6% and these 41 have exceeded consensus forecasts by an average of 2.5%. Comparable store sales are up just 2.6% year-over-year for the stores that have reported so far, and revenue is up an average of 7.8%.

Next week we are scheduled to get earnings from The Home Depot Inc. (NYSE: HD) which is expected to post year-over-year earnings per share growth of 16.6%, Target Corp. (NYSE: TGT) is estimated down 1.2%, Abercrombie & Fitch Co. (NYSE: ANF) up 2.5%, Saks Inc. (NYSE: SKS) up 9%, Staples Inc. (NASDAQ: SPLS) down 2.4%, Sears Holdings Corp. (NASDAQ: SHLD) up 15% but still a net loss, Gap Inc. (NYSE: GPS) up 60.5%, Dollar Tree Inc. (NASDAQ: DLTR) up 11.4%, and Limited Brands Inc. (NYSE: LTD) down 4%, among others.

As for the current quarter, Retail Metrics notes:

Earnings growth is expected to be even stronger in the all-important fourth quarter. These projections have not factored in the full effects of Super Storm Sandy, which could shave off some growth due to the large scale displacements of millions of people in the NY/NJ/Mid-Atlantic region, store closures, lost sales, and economic disruption. The current projection for 4Q12 earnings growth calls for a 13.4% YOY increase and 14.5% when excluding Wal-Mart.

Not bad at all.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Earnings, Research, Retail Tagged: AAP, ANF, CVS, DLTR, featured, GPS, HD, JCP, JWN, KSS, LTD, M, ODP, OMX, SHLD, SKS, SPLS, TGT, WMT

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