Retailers Begin to Report Earnings on Back of Disappointing January Retail Sales

 | Feb 20, 2024 14:48

  • Last peak week of the Q4 2023 Earnings season sees retailers reporting

  • Outlier earnings dates next week - IFF, D, POOL, EOG, ETSY

  • 1,584 companies expected to report during the final peak week of the Q4 season

    • Last week started off with a higher-than-expected inflation reading which tanked markets on Tuesday. The Consumer Price Index (CPI) increased 0.3% in January, driven by persistently high shelter costs.[1] This forced market participants to finally heed some of what the Fed has been communicating about fewer and later rate cuts this year.

    On the earnings front, ride-share companies made a splash last week. Lyft (NASDAQ:LYFT) reported better-than-expected results, but it was guidance for a 2024 profit margin increase of 500 basis points which sent the stock skyrocketing 67%.[2] Later it was revealed that this was a clerical error, and that the outlook only expected a 50 basis point expansion.

    Despite the revision, Lyft shares held onto some of those gains and still hit a 52-week high. Uber (NYSE:UBER), which reported results a week earlier, beating analyst expectations on the top and bottom-line, announced its first-ever buyback of $7B on Wednesday. This led to the stock increasing by 14% on that day. All of this as drivers went on strike for fair pay.

    On the leisure front, impressive results from Airbnb (ABNB) and TripAdvisor (NASDAQ:TRIP) suggested that consumers are still shelling out for travel and experiences. Fast casual restaurant Shake Shack (NYSE:SHAK) indicated the same as they beat on the top and bottom-line, but the restaurant space has been more mixed as Denny’s and Wendy’s reported disappointing results last week. 

    Retail sales for January were also released last week, showing a dip of 0.8% MoM, the largest drop in nearly a year.

    Sales at home improvement and garden stores saw the sharpest decline of 4.1% which doesn’t bode well for Home Depot’s earnings report next week, or Lowe’s (NYSE:LOW) the week after that. This is just another recent data point that suggests consumers are taking a breather after remaining resilient in the face of higher inflation and interest rates last year. 

    Now with 79% of S&P 500® companies having reported, the FactSet blended S&P 500 EPS consensus stands at 3.2%, an uptick from 2.9% the week prior.[8]

    h2 Buybacks in Focus/h2

    A couple of big names announcing share repurchase programs during the Q4 2023 earnings season stole headlines in the last few weeks. Meta (NASDAQ:META) announced a $50B buyback plan on their Q4 call, signaling the confidence the c-suite has in their growth prospects this year and propelling the stock higher.

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    And as mentioned above, Uber announced their first ever buyback of $7B last week.

    “Today’s authorization of our first-ever share repurchase program is a vote of confidence in the company’s strong financial momentum,” Uber CFO Prashanth Mahendra-Rajah announced in a press release on February 14.

    While those announcements caught investors’ attention, how have buyback announcements in general been holding up this earnings season?

    Taking a look at the data, the total number of buybacks announced in the first seven weeks of the year is rather light at 78. While this is still better than last year’s count of 61 buyback announcements, it’s well below the 5-year average of 110.

    This shows companies are returning less value to shareholders in the form of buybacks. The number of dividend announcements at this point is also lighter than usual, although as we pointed out last week, the share of dividend increases is higher than it has been in a year.