The Retail Earnings Parade for Q3 Begins just as Holiday Shopping Season Commences

Wall Street Horizon
5 min read

In This Article:

The Q3 earnings season is coming to a close in its usual fashion, with a word from retailers. With 93% of S&P 500 companies reporting at this point, YoY S&P 500 EPS growth has settled around 5.4%, while revenue growth increased 5.5% for the quarter.[1]The retailers will offer some much needed insight on the state of the US consumer when they report this week. While consumers have remained relatively resilient in the face of inflation over the last year, uncertainty still abounds, and a more cautious consumer has been noted by certain companies. Last week the retail party started with results from Home Depot and Dillard's.

Home Depot beat expectations on both the top and bottom-line for Q3, but noted customers were deferring big ticket projects.[2] Department store, Dillard's, was also able to beat analyst expectations on EPS and revenues, but reported YoY declines for both metrics. Same store sales were also down 4% from the year-ago quarter.[3]A slightly more positive look at consumer spending came from Disney's Q3 report. The media giant's entertainment segment came in with revenue growth that increased 14% YoY.[4] This segment includes traditional TV networks, direct-to-consumer streaming and films, showing consumers are willing to spend on entertainment. Even Disney's experiences segment which includes theme parks and consumer products saw 1% revenue growth after posting a downturn last quarter.[5]One big detriment to the retail industry has of course been inflation, and while it has improved it remains stubborn as seen in last week's CPI figures for October. The 12-month inflation rate moved up to 2.6%, from 2.4% in September.[6] A major contributor to this increase was sticky shelter prices which continued higher.Another potential area of concern for retailers is the proposed tariff policies by President Elect Donald Trump. The proposal includes a universal 10 - 20% tariff on imports from all foreign countries and an additional 60 - 100% on imports specifically from China.[7] The National Retail Federation recently reported that such tariff proposals could cost American consumers up to $78B in annual spending power. NRF Vice President of Supply Chain and Customs Policy, Jonathan Gold said This tax ultimately comes out of consumers' pockets through higher prices.[8] On this week's earnings calls we'll likely hear retailers' plans on how they may deal with these potential tariffs.

Event Cluster for Nvidia

This week also brings highly-anticipated results from Nvidia. The AI darling will report Q3 results on Wednesday, Nov 20.? The stock has rallied 205% YTD on the back of AI demand. Last month Nvidia CEO Jensen Huang told CNBC that its Blackwell chip is in full production and that demand was insane.[9]Along with its upcoming earnings call, we've noticed Nvidia participating in a lot of prominent tech conferences in the last month, continuing to establish itself as a leader in the AI space. Wall Street Horizon has found that while a standalone event such as a company's upcoming earnings release date may affect volatility, investigating multiple events closely in relationship to one another can give a more complete picture of a company's financial health. Observing the information pre-event, during the event and post-event and how they interact can be critical to understand how events relate to trading and risk strategies. Just this month alone leaders at NVDA have spoken at six conferences, with two more slated for November 20.

Recommended Stories