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How did U.S. retailers perform over the holiday season?

Jharonne Martis

05 Feb 2018

Shoppers ride escalators during Black Friday sales at the Uniqlo Fifth Avenue store in Manhattan, New York. Photography:Andrew Kelly
Photography: Andrew Kelly

The retail and restaurant winners and losers from the holiday season in the United States have been revealed in analysis published by Thomson Reuters on Eikon and Lipper Alpha Insight.

The all-important holiday period for U.S. retailers mimicked Goldilocks — not too hot, not too cold. This was confirmed by the Thomson Reuters Same Store Sales (SSS) Index, which is pointing to 1.8 percent growth for Q4 2017.

While that’s stronger than the previous year’s 0.8 percent result, it’s still below the 3 percent healthy mark, suggesting that spending was modest.

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Deeper analysis, which is available on Thomson Reuters Eikon and Lipper Alpha Insight, reveals where consumers went shopping and dining:

  • The Thomson Reuters consumer confidence index suggests consumers are feeling good about their economic situation — and spending their discretionary income.
  • The average holiday discount wasn’t much different than the average discount offered in previous months.
  • However, what did change was an increase of 42 percent in the number of emails sent out by retailers during the season, as Thomson Reuters discovered in collaboration with StyleSage Co.
  • The Thomson Reuters Retail and Restaurant Index Q4 earnings are expected to rise 5.7 percent, below the 10.1 percent growth seen in Q4 2016.
  • The Internet sales sector continues to have the highest earnings growth rate (13.9 percent) of any sector.
  • On the other hand, the Leisure Products sector has the lowest growth rate (-18.9 percent) of any sector.
  • The Thomson Reuters Restaurant Same Store Sales Index is looking at a 2.4 percent Q4 2017 growth, up from the 1.9 percent SSS estimate at the beginning of November.
  • All restaurant sectors are doing better than last year. The quick-service sector is on top with a robust 3 percent SSS estimate, above last year’s 1 percent SSS result.
  • For Q4 2017, there have been 58 retail negative EPS pre-announcements, compared to 23 positive.

Watch: Thomson Reuters I/B/E/S – The consensus for consensus estimates

Holiday season earnings

When looking at the earnings growth rates for the holiday season for the 219 retailers tracked by Thomson Reuters, the Internet sector continues to have the highest earnings growth rate (14.1 percent) of any sector.

Five of the nine retailers in the sector are anticipated to see higher earnings than a year ago. Netflix has already reported a 173.3 percent jump in earnings per share (EPS), while Nutrisystem (44.3 percent) has the highest EPS growth estimate.

Amazon is also on track to see a 19.8 percent jump in earnings.

On the other hand, the Leisure Products sector has the lowest growth rate (-21.7 percent) of any sector. Four of the seven retailers in the sector are expected to see earnings declines compared to Q4 2016, led by Vista Outdoor, Inc. (-90.8 percent) and Mattel, Inc. (-67.2 percent).

Thomson Reuters Retail Earnings Growth Rate – Q4 2017 Source: Thomson Reuters I/B/E/S 

Revised guidance

In addition to the 58 Q4 negative pre-announcements and 23 positive for EPS, retailers posted 41 negative and 31 positive revenue forecasts.

The bulk of the negative guidance (40 percent) came from the apparel sector.

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Thomson Reuters Retail Earnings Growth Rate – Q4 2017 Source: Thomson Reuters I/B/E/S

Consumer confidence

Retailers offered the traditional promotions, and shipping deals to lure shoppers.

Still, the Thomson Reuters consumer confidence index suggests consumers are feeling good about their economic situation, better about extending themselves and spending their discretionary income.

Thomson Reuters IPSOS consumer sentiment index Source: Thomson Reuters Eikon

Thomson Reuters Same Store Sales — Retail

Analysts polled by Thomson Reuters are becoming more bullish on consumer spending as retailers get ready to report their earnings results for the holiday season.

In fact, analysts have raised their Q4 same store sales outlook for several retailers.

As a result, the Thomson Reuters Same Store Sales Index is now looking at a 1.8 percent Q4 2017 growth, up from the 1.5 percent SSS estimate at the beginning of November.

The discounters are doing much better than last year, with a 2.9 percent SSS estimate vs. 1.4 percent last year.

Same Store Sales Sectors – Q4 2017 vs. Q4 2016 Source: Thomson Reuters I/B/E/S

  • Same Store Sales winners

Millennials respect Aerie’s no-Photoshop marketing policy, and as a result it has a strong cult following. The teen retailer has the strongest SSS estimate in our retail universe at 20.3 percent.

Similarly, teen retailer Zumiez was a favorite this past holiday season with a 6.4 percent SSS, followed by shoe retailer Journeys Group, and Urban Outfitter’s Free People division with SSS estimates of 6.4 percent and 5.5 percent, respectively.

Meanwhile, the strong housing market is boosting sales at West Elm and Home Depot, with a 10.4 percent, and 6.4 percent SSS estimate.

Beauty supplies are always a favorite during the holidays. Ulta is expected to see a 9.2 percent growth in SSS, while the athleisure trend is helping Lululemon with a 7.3 percent SSS estimate.

Top SSS estimates – Q4 2017 Source: Thomson Reuters I/B/E/S

  • Same Store Sales losers

The usual suspects fall into this category, including Sears, Guess and Kors, which are hurting from company-specific issues.

Still, Francesca’s Holdings has the weakest SSS estimate for the holiday season at -13.6 percent.

Like other mall stores, Build-A-Bear sales have been hurting from weak mall traffic, and has a -7.8 percent SSS estimate.

Meanwhile Chico’s and Guess fashion have been out of favor for some years now, and have a -7.3 percent, and -7 percent SSS, respectively.

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Image 6: Bottom SSS estimates – Q4 2017 Source: Thomson Reuters I/B/E/S

Thomson Reuters Restaurant Same Store Sales

The improvement in consumer sentiment has also led analysts to raise their Q4 same store sales outlook for several restaurants.

As a result, the Thomson Reuters Restaurant SSS Index is now looking at 2.4 percent Q4 2017 growth, up from the 1.9 percent SSS estimate at the beginning of November.

All sectors are doing better than last year. The quick sector is on top with a robust 3 percent SSS estimate, above last year’s 1 percent SSS result.

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Restaurant Same Store Sales sectors — Q4 2017 vs. Q4 2016 Source: Thomson Reuters I/B/E/S

  • Restaurant Same Store Sales winners

Domino’s Pizza and Wingstop traditionally do well during the football season, and have the highest SSS estimate at 6.9 percent and 4.8 percent, respectively.

Yum China continues to outperform its U.S. business with estimates of 3.5 percent, and 2.3 percent SSS.

Meanwhile, McDonald’s is on track to post a 4.3 percent SSS, and 11.62 percent EPS growth. Starbucks missed its 3.2 percent SSS estimate, and reported a 2.0 percent SSS.

Its China division was its strongest with a 6 percent SSS, above its 2.1 percent final estimate.

Top SSS estimates – Q4 2017 Source: Thomson Reuters I/B/E/S

  •  Restaurant Same Store Sales losers

Potbelly has been hit by weak sales, and operating efficiency has been hurting.

As a result, the restaurant has the weakest SSS estimate at -3.9 percent, followed by Bojangles and Dave & Buster’s with comparatives of -3.4 percent, and -2.7 percent, respectively.

Sonic Corp. has been hurt by the cold weather and is expected to post a -2 percent SSS, followed by Del Frisco’s -1.8 percent SSS estimate.

Restaurant Bottom SSS Estimates – Q4 2017 Source: Thomson Reuters I/B/E/S

Online sales

E-commerce sales continue to grow, but its transactions still make up only a fraction of total retail sales; 9.1 percent as of the end of the third quarter of 2017, compared to 4.2 percent in early 2010.

As a result, the Internet & Catalog Retail sector has the strongest estimated Q4 2017 earnings growth rate at 13.9 percent.

Although retailers dialed up the average discount after Black Friday, it wasn’t much more than the average discount offered from previous months.

What’s more, the average U.S. discount remained around 40 percent within the 33 percent – 45 percent global average discount.

However, what did change is the frequency with which retailers engaged in promotional messaging, as Thomson Reuters discovered in a collaboration with StyleSage Co., which analyzes retailers, brands, online trends and products across the globe.

StyleSage Co. saw an increase of 42 percent in the number of emails being sent out, and a 12 percent increase in the number of active promotions during the Black Friday/Cyber Monday holidays.

E-Commerce As a Percent of Total Retail Sales: 1999-Present Source: Thomson Reuters Eikon

Thomson Reuters Eikon

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