Earnings Watch: Retail Ahead

The Estimize consensus calls for EPS of -$0.36, a penny worse than the Wall Street consensus. Currently, the Estimize community is looking for sales of $388.98M, a mere $420k higher than the Street’s expectation.

What to Watch: Last week, Abercrombie & Fitch (N:ANF) kicked off the teen retail reports with a bang. The company posted FQ4 2016 EPS of $0.48, 28 cents above the Estimize consensus. Revenues also beat expectations by $11.4M. This was a welcomed report as teen retailers have continued to lose market share to the “fast-fashion” names such as (ST:H&M), Zara and Forever 21. Aeropostale is on the lower-end of the teen retailers, catering to more value-conscious shoppers. The company missed estimates for the first two fiscal quarters of 2016, and are expected to post their third consecutive quarter of negative EPS in FQ3 2016. Same store sales have also been a weak spot, falling 8% in the latest quarter. As such, the company provided Q3 EPS guidance in a range of -$0.30 to -$0.38, and operating losses of $19M - $25M. CEO, Julian Geiger did say he was pleased with results from the beginning of the back-to-school shopping season, boosted by a particular improvement in girls’ apparel. We’ll hear on Wednesday if that trend continued throughout the rest of the quarter, and more on the company’s outlook for the all important holiday shopping season.

• h3 Kroger Company (N:KR)/h3

Consumer Staples - Food & Staples Retailing | Reports December 3, before the open.

The Estimize consensus calls for EPS of $0.41, 2 cents below the Wall Street estimate. Revenues of $25.27B are above the Street’s expectation for $25.22B.

What to watch: Kroger has been intently focused on expanding their natural and organic food business and as a result has been able to steal market share from upscale grocers. The mainstream grocery chain provides value offerings to customers that are no longer willing to spend their whole paycheck at Whole Foods. The company has shown strong fundamentals, with earnings per share (EPS) growth in the double digits for the past six quarters, and double-digit sales growth in four of the past six quarters. Kroger faces some stiff competition from other retailers enforcing the same strategy such as Wal-Mart (N:WMT), Target (N:TGT) and Sprouts (O:SFM). The stock is up 18% this year.

• h3 Dollar General (N:DG)/h3

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Consumer Discretionary - Multiline Retail | Reports December 3, before the open.

The Estimize consensus calls for EPS of $0.87, in-line with Wall Street. Revenues of $5.084B are actually just slightly below the Street’s expectation for $5.087B.

What to Watch: Last week, fellow discounter Dollar Tree (O:DLTR) greatly missed EPS expectations, but managed to beat on the top-line by over $100M. Dollar Tree’s miss can be attributed to costs related to its acquisition of Family Dollar Stores (N:FDO) this summer, after Dollar General placed a failed bid. Prior to the merger, DG was the largest deep-discount retailer in the country, boasting approximately 11,000 locations, now competing with Dollar Tree’s 13,500 stores nationwide. The company now has to find ways to grow amidst increasing competition and shrinking market share. One advantage Dollar General has is greater customization of its stores, focusing on stocking each location with products that sell best in that neighborhood. By comparison, Family Dollar Stores have traditionally been stocked by the McLane Co., making the offerings very uniform at each location. Dollar General stores typically occupy small neighborhoods, too small for Wal-Mart (N:WMT). But the discount wars are heating up as Wal-Mart and even Target eye smaller neighborhoods. Wal-Mart plans to open up 200 smaller stores this year alone, bringing the total up to 700 of its total 3,200 stores worldwide. Target (N:TGT) is further behind, but has made opening up its TargetExpress stores a main priority going forward.

• h3 Ulta Salon Cosmetics & Fragrance (O:ULTA)/h3

Consumer Discretionary - Specialty Retail | Reports December 3, after the close.

The Estimize consensus calls for EPS of $0.93, a dime above the Wall Street consensus, but still 9 cents below company issued guidance. Revenues of $784.4M are above the Street’s expectation for $732.4M, yet again below the company’s guidance of $876M.

What to Watch: Ulta Salon, Cosmetics & Fragrance, Inc. is one specialty name that has posted incredibly strong fundamentals for the last several quarters, reaping the benefits of a growing beauty sector which has seen annual revenues increase by 2.3% for the last five years according to IBIS World. For the last 7 consecutive quarters the company has beat the Estimize consensus on the top and bottom-line, and according to guidance they are poised to do so again in the third quarter. Same-store sales have been incredibly strong for this name, increasing 10.1% in the second quarter, causing the company to increase several of their 2015 guidance metrics. Comparable store sales are now expected to grow in a range of 8% - 10%, above previous guidance of 7% - 9%. Ulta also anticipates EPS growth will be in the high teens for 2015, compared to prior guidance of 15% - 17%. The beauty retailer has done a great job at pulling back on discounting and revamping its loyalty program, both efforts which have helped to increase average order value. Other efforts to invest heavily in better messaging, more targeted promotions and employee training have also paid off. While there is certainly stiff competition in the space, with many department stores such as Kohl's (N:KSS)’s, Macy's (N:M) and JC Penney (N:JCP) doubling down on their beauty efforts, Ulta is the only to offer a products with a wide array of price points as well as salon services. While an awareness gap still separates it from competitors such as Sephora, the stock has done remarkably well this year, rising 34%.

• h3 Ambarella (O:AMBA)/h3

Information Technology - Semiconductors | Reports December 3, after the close.

The Estimize consensus calls for EPS of $0.91, 2 cents below the Wall Street estimate. Revenues of $92.5M are above the Street’s expectation for $91.5M.

What to Watch: Ambarella is best known for making the chips that go into GoPro (O:GPRO) cameras, one of its top customers. While GoPro has been able to achieve triple-digit quarterly EPS growth since its IPO in June 2014, the company missed the mark big-time in their latest report. In FQ3 2015, GoPro results missed the Estimize consensus by 7 cents on the bottom-line, and by $43M on the top-line. Despite exciting new endeavors which include a quadcopter drone and virtual reality cameras, investors fear the recent drop cannot bode well for Ambarella, which relies on GoPro for a large chunk of its revenues. As a result of the GoPro report, shares of AMBA fell to $49.44 in the following days, their lowest level of the year. This just continued a downward trend for the stock, which has lost over half of its value since peaking at $126.70 in June. This should quell any fears around a rich valuation, which previously spooked some investors. Any good news out on Thursday could help to boost the stock.

Written By: Estimize