Retail stocks: Analysts predict ‘trade down’ for discounters

Discount clothing and home goods store TJX (TJX) publishes its quarterly results on Wednesday, while its rival Ross Stores (ROST) and department store Kohl (KSS) report Thursday.


Retail stocks rose broadly during the day, led by walmart (WMT), whose quarterly results beat estimates after earlier struggles to control costs and changing consumer demand. Ross Stores was currently the biggest winner on the Nasdaq 100.

The report by TJX, Ross and Kohl as Wall Street analyzes the impact of rising prices on low- and middle-income consumers.

Some analysts said off-price stores like TJX and Ross could start enjoying more bargain-hunting shoppers in the second half of this year, even as expectations have dimmed for the second quarter. The chains are also catching up with last year’s results, which were boosted by pandemic-related stimulus aid.

It’s a busy week for retail revenue. Results of Target (TGT) are due Wednesday morning.

TJX Earnings, Retail Stocks

Estimates: Wall Street expects TJX, which runs TJ Maxx and Marshalls, to earn 67 cents per share for its second fiscal quarter, down 15%. Analysts had expected revenue of $12.054 billion, largely unchanged from a year earlier.

Same-store sales fell 1.2%, according to FactSet.

Results: To be submitted before the opening of the market on Wednesday.

Shares rose 2% to 66.65 in Tuesday’s trading. On Friday, TJX stock recovered its 200-day line for the first time in six months.

The stock’s composite rating is 76. Its EPS rating is 64.

Among other retail stocks, off-price retail rival Burlington Stores (BURL) rose 5.1%. Burlington releases its results Aug. 25.

WMT stock rebounded 5.1%. TGT shares gained 4.6%.

“A Trade Is Coming”

BofA analysts Lorraine Hutchinson and Melanie Nunez in a research note last week said retailer demand was hit in June and July as customers recalibrated their budgets.

But they said “we believe a trade decline is ahead” in the second half of the year, following signs of weaker demand at Walmart, Target and Kohl’s, as well as high-end names like the fashion retailer. Turn (RVLV) and sneaker manufacturer all the birds (BIRD).

Last month, Walmart lowered its earnings outlook by cutting prices on items like clothing that have become harder to sell as more expensive groceries gobble up a larger share of consumer spending. This followed weak first-quarter results and guidance on May 17.

But, as BofA retail inventory analysts have suggested, off-price retailers stand to gain from rivals’ excess product.

“Inventory availability for off-price is better than ever as retailers seek to eliminate large volumes of excess inventory that they cannot sell or hold,” they said.

“The industry is getting more and more promotional, but the fact that off-price pricing buys most inventory in season allows them to only buy products that are of great value compared to promotional/clearance pricing. current.”

Revenue from Ross stores

Estimates: Wall Street expects Ross Stores to earn $1 a share in the second quarter, down 28%, with revenue down 4% to $4.617 billion. Same-store sales are expected to fall 5.9%.

Results: Due after closing Thursday.

Shares of Ross Stores rose 2.75% to 92.64 on Tuesday. Stocks have been trending higher since the beginning of July, but are still below the 200-day descending line.

The ROST stock has a composite rating of 33 and an EPS rating of 54.

Kohl’s Earnings

Estimates: Wall Street expects Kohl’s to earn $1.12 per share, a 55% drop, as revenue falls 6% to $3.954 billion. Same store sales were down 8.1%.

Results: To be submitted before the opening on Thursday.

Kohl’s stock gained 6.1% on Tuesday to 35.09. The stock has recovered support above its 50-day line, which has been falling rapidly since May. The stock has a low composite rating of 14. Its EPS index is 17.

Kohl’s for much of this year and last year resisted takeover bids and faced pressure from activist investors who complained of poor sales results and tried to shake the board of retailer administration and other operations.

In March, the department store announced plans to become “the retailer of choice for the active, casual lifestyle”, including efforts to revamp stores, improve its loyalty program and expand its offering. clothes for women. But in July, after considering interest from more than 25 possible suitors, Kohl said efforts to reach an agreement on a sale to Franchise Group, the highest bidder in that process, had failed. The title has plunged since this spring.

Cowen analyst Oliver Chen downgraded Kohl’s stock performance to the market this month, saying the company was “vulnerable to pressure from the middle-income consumer.”

He said Kohl needed to continue upgrading its womenswear segment. And he said his efforts to become more of a destination for beauty products, through the partnership with Sephora, had shown progress. But he said climate change could hurt seasonal sales.

“July was warmer and drier overall across most of the United States, with the exception of specific pockets of heavy rain and flooding, which could delay cold weather and back-to-school trends,” a- he declared.


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