Breakdown of Marketing Profits That Show Slowing Consumer Spending | So Good News

[ad_1]

Not surprisingly, the combined weight of rising inflation, rising interest rates and economic uncertainty has forced consumers to change their spending habits.

This issue has undoubtedly been difficult for low-income families for a long time. But we can confidently say that it is not just a consumer segment and it could raise the price in the coming days and weeks.

We saw something in the Walmart WMT report that showed the retailer benefiting from high-income shoppers ‘selling out’ at its stores in response to the aforementioned hurricane.

The real estate business is a tough and competitive environment even in “normal” times and these are not normal times. They need the right amount, otherwise they will lose sales if they don’t have enough sales as was the case during the pandemic, or they will have to cut back and destroy margins if they have too much, as we saw with Walmart and Target TGT this summer quarter.

Retailers also need to make sure they have the right products, as we’ve seen with Target and Walmart stocking items like patio furniture that consumers weren’t interested in repurchasing after the pandemic. Keeping stores fully staffed in a steady market and ensuring the right price discounts are some of the challenges that big box operators like Walmart, Target and others face every day.

It’s all about integration and proper management.

In terms of Q3 corporate earnings, it’s been a mixed bag. When it comes to controlling and changing the way consumers spend, some retailers have done better than others. Walmart was fine, Target was not. Macy’s M, Foot Locker FL and Lowe’s LOW executed well, but others did not.

You can see some of the annual performance of Walmart (blue line), Target (green line), Lowe’s (orange line) shares and the S&P 500 index (red line).

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

In the case of Retail Sector 2022 Q3 seasonal earnings forecastwe now have results from 29 of the 34 stocks in the S&P 500 index.

Unlike the standard S&P categories that leave retail players spread across different sectors, especially Consumer Discretionary, Zacks’ stand-along Retail sector classification that includes general retailers, digital players and restaurants allows for a more detailed understanding of the trends. in this area.

The total earnings of Q3 of these retailers are down -5.5% from the same period last year on +8.6% higher revenue, and 72.4% fight EPS and 58.6% fight income.

The comparison charts below place the Q3 share of hits for these retailers historically.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

As you can see above, sellers have struggled to come up with surprises so far, although it is a good showing relative to what we saw in the 2022 Q2 group.

In terms of revenue and revenue growth, Amazon’s weak numbers contribute significantly to the sector’s year-over-year growth (Amazon is part of the Zacks Retail segment, not the Zacks Technology segment).

The two comparison charts below show Q3 earnings and revenue growth compared to other recent periods, both with Amazon results (left chart) and without Amazon numbers (right chart).

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

Q3 Earnings Season Scorecard

Including all the results that came in on Friday, November 18Thwe now have Q3 results from 476 members of the S&P 500 which comprised 95.2% of the total membership of the index.

For the 476 members who have already shown results, total income has increased by +1.8% since the same period last year at +11.8% higher income, with 69.1% fighting EPS and 68.3% exceeding the income limit.

Here’s how the 2022 Q3 earnings and financial ratios of these companies compare over time.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

Here’s how 2022 Q3 EPS and revenue growth rates for these companies compare over time.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

Our EPS and earnings numbers are below what we’ve seen from the same group of companies in the recent past, but by a wide margin so far.

Managing Variable Income

The chart below shows the mixed profit and revenue growth for Q3 2022 compared to what we saw in the previous four quarters and what is expected in the next three years.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

This is not surprising, as the global economy is slowing down, due to the rise in interest rates based on the problems of inflation, the problems that are about to end which have started to decrease and China’s zero-Covid restrictions.

The orange bars above represent the growth rate. Therefore, in 2022 Q3, revenue is about to grow +11.6% from the same period last year even though earnings are only expected to grow +1.6%. Economic growth that appears to have risen is a direct function of price power, where firms can leverage higher input prices to eliminate consumers. We are keenly aware that this cannot continue forever and the events of the next three episodes confirm this.

The chart above shows that earnings in the current period (2022 Q4) are expected to fall -5.1% below the annual rate on +4.6% higher income.

Estimates have been steadily declining, consistent with what we saw prior to the start of the Q3 earnings season.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

Estimates for the full year 2023 have also been declining, with a marked negative change especially on the old Power base. You can see this in the chart below which shows the estimated earnings for 2023 on an old Energy basis.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

As of mid-April, the 2023 estimate for earnings is down -8.6% on the S&P 500 index as a whole and -11.5% on an old Energy basis.

Estimated declines have been most prominent in Tech (down -18.9% since mid-April), Construction (-25.1%), Real Estate (-18.6%), Industrials (-14.3%), Consumer Discretionary (-19.3%) ) and Aerospace ( -13.4%). Overall, estimates have been cut for 13 of the 16 Zacks sectors.

The chart below shows the full picture of annual earnings.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

There are some in the market who think that the earnings of 2023 should be below the level of 2022 instead of the expected growth of +2.8% because the US economy is expected to fall slowly.

I’m not saying that 2023 earnings won’t be below 2022 levels; It could be, and based on recent updates, it could be headed there. But it is not wrong to expect a gradual decline in “real” GDP to lead to lower corporate profits. Companies’ earnings and earnings are ‘nominal’ and will reflect the effect of inflation. Inflation is expected to moderate in 2023, but remains optimistic.

For a more detailed picture of overall earnings, including expectations for the coming years, please see our weekly Earnings Trends report. >>>>Evaluating Additional Risks Related to Earnings Estimates

Want the latest thoughts from Zacks Investment Research? Today, you can download the 7 Best Stocks for the Next 30 Days. Click to get this free report

Macy’s, Inc. (M) : Free Stock Analysis Report

Target Corporation (TGT): Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

Lowe’s Companies, Inc. (LOW) : Free Stock Analysis Report

Foot Locker, Inc. (FL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

[ad_2]

Source link