Q4 Retail Earnings Season: A Cheat Sheet

Brick-and-mortar stores continue to suffer at the hands of e-commerce, with the spread between both widening by about 500 basis points over the past three months, JPMorgan's Matthew Boss said in a preview of fourth-quarter earnings for department stores and specialty softlines.

A material step down in traffic occurred in December, especially for mall-based department stores and specialty retail, with the weaker trend sustained through February, the analyst said in a Friday note. 

JPMorgan remains most cautious on department stores and mall-based specialty retailers, and Boss lowered fourth-quarter numbers and projected risk to FY19 consensus EPS estimates.

The analyst said he has a selective stance on the long side with defensive growth subsectors: namely off-price and discount retailers and "best-in-class" global brands.

The following are JPMorgan's expectations for retail earnings, sorted by subsector:

Department Stores

Macy's Inc (NYSE: M)

• Earnings date: before the market open, Tuesday, Feb. 26
• Rating: Neutral
• Price target: Reduced from $25 to $24
• Fourth-quarter EPS expectation: $2.55

J C Penney Company Inc (NYSE: JCP)

• Earnings date: before the market open, Thursday, Feb. 28
• Rating: Underweight
• Fourth-quarter EPS expectation: (-1 cent)

Nordstrom, Inc. (NYSE: JWN)

• Earnings date: after the market close, Thursday, Feb. 28
• Rating: Underweight
• Price target: Reduced from $41 to $40
• Fourth-quarter EPS expectation: $1.40

Kohl's Corporation (NYSE: KSS)

• Earnings date: before the market open, Tuesday, March 5
• Rating: Overweight
• Price target: Reduced from $78 to $76
• Fourth-quarter EPS expectation: $2.18

Dillard's, Inc. (NYSE: DDS)

• Earnings Date: Not confirmed
• Rating: Neutral
• Price target: Reduced from $62 to $61
• Fourth-quarter EPS expectation: $2.65

Off-Price Retailers

TJX Companies Inc (NYSE: TJX)

• Earnings date: before the market open, Wednesday, Feb. 27
• Rating: Overweight
• Price target: Increased from $51 to $54
• Fourth-quarter EPS expectation: 70 cents

Burlington Stores Inc (NYSE: BURL)

• Earnings date: before the market open, Thursday, March 7
• Rating: Overweight
• Price Target: $184
• Fourth-quarter EPS expectation: $2.77

Ross Stores, Inc. (NASDAQ: ROST)

• Earnings date: Not confirmed
• Rating: Overweight
• Price target: Increased from $93 to $97
• Fourth-quarter EPS expectation: $1.15

Specialty Softline Retailers

L Brands Inc (NYSE: LB)

• Earnings date: after the market close, Wednesday, Feb. 27
• Rating: Neutral
• Price target: Increased from $28 to $29
• Fourth-quarter EPS expectation: $2.07

Gap Inc (NYSE: GPS)

• Earnings date: after the market close, Thursday, Feb. 28
• Rating: Underweight
• Price target: Reduced from $24 to $22
• Fourth-quarter EPS expectation: 65 cents

Urban Outfitters, Inc. (NASDAQ: URBN)

• Earnings date: after the market close, Tuesday, March 5
• Rating: Neutral
• Price target: Reduced from $34 to $31
• Fourth-quarter EPS expectation: 78 cents

Abercrombie & Fitch Co. (NYSE: ANF)

• Earnings date: before the market open, Wednesday, March 6
• Rating: Underweight
• Price target: $19
• Fourth-quarter EPS expectation: $1.14

American Eagle Outfitters (NYSE: AEO)

• Earnings date: after the market close, Wednesday, March 6
• Rating: Neutral
• Price target: Increased from $21 to $22
• Fourth-quarter EPS expectation: 42 cents

Signet Jewelers Ltd. (NYSE: SIG)

• Earnings date: before the market open, Wednesday, April 3
• Rating: Neutral
• Price target: Reduced from $27 to $24
• Fourth-quarter EPS expectation: $3.82

Athletic Apparel Stores

Foot Locker, Inc. (NYSE: FL)

• Earnings date: before the market open, Friday, March 7
• Rating: Neutral
• Price target: Increased from $55 to $63
• Fourth-quarter EPS expectation: $1.39

Lululemon Athletica inc. (NASDAQ: LULU)

• Earnings date: Not confirmed
• Rating: Overweight
• Price target: $182
• Fourth-quarter EPS expectation: $1.75

Dollar/Discount Stores

Five Below Inc (NASDAQ: FIVE)

• Earnings Date: Not confirmed
• Rating: downgraded from Neutral to Overweight
• Price target: $139
• Fourth-quarter EPS expectation: $1.58

With shares of Five Below shares up 85 percent in the past nine months and valuation "re-rated," Boss said he sees the risk-reward as balanced. 

" ... We believe FIVE's best-in-class store economics (i.e. 150-percent ROI / less than one-year payback) and top-line consistency (with new stores accounting for 85 percent of annual growth) are now better understood and deserve a premium growth multiple." 

Dollar General Corp. (NYSE: DG)

• Earnings date: Not confirmed
• Rating: Overweight
• Price target: Increased from $123 to $127
• Fourth-quarter EPS expectation: $1.89

Ollie's Bargain Outlet Holdings Inc (NASDAQ: OLLI)

• Earnings date: Not confirmed
• Rating: Overweight
• Price target: Increased from $87 to $95
• Fourth-quarter EPS expectation: 71 cents

Big Lots, Inc. (NYSE: BIG)

• Earnings date: Not confirmed
• Rating: Neutral
• Price target: Increased from $31 to $32
• Fourth-quarter EPS expectation: $2.34

Tough Year In Store?&

JPMorgan forecast a rocky road ahead for retailers in 2019, as the firm expects the second-half-weighted first quarter to be reliant on March/April weather and a tax refund stimulus. The firm said second-quarter comparisons should ramp 100 basis points sequentially, with a mixed bag in the third quarter.

The fourth quarter is likely to the worst since 2013 due to the six fewer days between Thanksgiving and Christmas, according to JPMorgan.

The SPDR S&P Retail (NYSE: XRT) has added about 9.6 percent year-to-date.

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