Retail Wraps: Q2 Earnings, Sales And Trump's Council

Tuesday, August 15th, 2017

High profile U.S. retailers continue to report Q2 results in this final leg of earnings season: specialty retailers Home Depot (NYSE:HD) , Coach (NYSE:COH) and Dick’s Sporting Goods (NYSE:DKS) all posted July quarter numbers ahead of today’s opening bell. Retail Sales for last month also hit the tape. Finally, more CEOs have resigned President Trump’s American Manufacturing Council this morning, following Merck (NYSE:MRK) CEO Ken Frazier’s departure yesterday in the wake of Trump’s initial response to the white supremacist rally over the weekend that claimed one life and several injuries.

July Retail Sales came in hotter than expected this morning, rising 0.6% from the 0.3% expected. Perhaps even more telling, June’s revision swung from a disappointing negative to a decent positive: from -0.2% in the initial read to a revision of 0.3% this morning. Behind the headlines, ex-autos and ex-autos & gas were a strong 0.5%, with the control number 0.6%. These indicate real retail sales growth and not a one-time anomaly making its way into the headline number.

These figures also satisfy those economists who’ve been scratching their heads of late, trying to figure out how a robust labor market, surging consumer confidence and other growth metrics all pointing higher while retail sales continued to lag. Now growth of more than a full percentage point over the past two months look to keep these folks from tearing up their models in despair.

Q2 Earnings Roundup

Home Depot outperformed expectations this morning, beating on the bottom line by 3 cents to $2.25 per share (up 14.2% year over year) on quarterly sales that reached $28.11 billion, easily outpacing the $27.84 billion in the Zacks consensus (up 6.2% year over year). The Zacks Rank #2 (Buy)-ranked home improvement giant cranked up guidance in sales (from 4.6% to 5.3%) and earnings (from 11% to 13%). Even still, HD shares are trading down slightly in today’s pre-market — potentially a “sell the news” scenario for a company that is up 15% year to date.

Specialty handbag retailer Coach beat earnings and sales estimates for its fiscal Q2, but guidance was down and so is the stock in pre-market trading. Earnings of 50 cents per share beat expectations by a penny, on $1.33 billion in revenues which surpassed the $1.15 billion we were looking for. Yet Coach lowered full-year earnings down nearly a dime per share from previous estimates. The company expects the Kate Spade purchase to yield $1.2 billion by the end of the fiscal year.

And Zacks Rank #4 (Sell)-rated Dick’s Sporting Goods is selling off “big league” this morning following its Q2 earnings release. Bottom line was worse than expected by 4 cents from $1.00 per share expected, while sales were a smudge under the $2.17 billion in the Zacks consensus. Guidance for both sales and earnings in the full year have also been ratcheted down, and Dick’s shares are selling off after already having tumbled more than 30% this year.

The Incredible Shrinking Manufacturing Council

CEOs from both Intel (NASDAQ:INTC) and UnderArmour (NYSE:UA) have given up their seats on President Trump’s American Manufacturing Council early today. Intel’s Brian Krzanich and UA’s Kevin Plank both cited tacit support from the White House toward separatists who rallied and attacked protestors in Charlottesville, VA on Saturday as the reason for their forfeiting their posts.

President Trump has since stated publicly that “racism is evil, including the KKK, neo-Nazis and white supremacists.” It is unclear if these corporate leaders will attempt to be replaced. To this point, the President has not yet tweeted anything disparaging about either CEO.

Mark Vickery
Senior Editor

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