Earnings Preview: Retailers

 | Feb 25, 2014 | 11:00 AM EST
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A lot of retails are scheduled to report earnings this week. Among the names I am watching are: TJX (TJX), Dollar Tree (DLTR), J.C. Penney (JCP) and Lowes (LOW). Following the retail business has become a thankless job as company after company reported disappointing numbers. But as winter turns to spring and investors forget about the dismal holiday period, I think the outlook will improve.

It seems like the deck has been stacked against the entire retail group all year. Just last week Nordstrom (JWN) guided down first quarter earnings by $0.14 on total sales that were below consensus. The company even cut gross margin guidance telling investors heightened promotional activity was squeezing profits. It seems even the well off are staying out of the stores.

TJX will report on Wednesday before the market opens. I expect earnings of $0.83 on $7.88 billion in revenue. TJX has held up well except for a scary drop in the stock between January and February. That was when a jumble of poor retail numbers hit the tape. I expect the company to continue to deliver solid results as its execution has been near perfect.

In mid November, Dollar Tree missed estimates and guided the fourth quarter down. Investors were blindsided by the report and the stock sold off sharply. In fact, the stock fell 15% over the next two months. It seems the stock is in a holding pattern right now as investors wait for a better forward outlook.

The consensus is expecting revenue of $2.3 billion and earnings per share of $1.06. Last quarter the company managed same store sales of 3.3%, driven by higher traffic as new consumers flocked to the dollar stores. We'll see if Dollar Tree can regain its footing.

J.C. Penney reports on Wednesday and I think we are all hoping for a miracle. The stock is down 41% this year, leaving the company with a market cap of $1.5 billion. For the fourth quarter, comp store sales were up 2%. Analysts are expecting sales of $3.8 billion, but I think that estimate is low.

Fourth quarter revenue should have rebounded from last years' dismal result. A comp of 2%, probably puts revenue somewhere over $5 billion. It remains to be seen if a blow out revenue number will be enough to drive the shares higher.

Lowes has been outperforming Home Depot (HD) in the last year. The stock is up 32%, while Home Depot is up just 20%. Lowes reports on Wednesday and analysts are expecting revenue of $11.6 billion and earnings per share of $0.31. I expect a strong quarter for Lowes.

It seems the company has addressed some of the execution and merchandising problems that have plagued it in the past. A solid housing recovery drove sales higher. I believe as we head into spring, it can only get better for Lowes. The best selling category was appliances as Americans bought a new fridge for Christmas.

We know the fourth quarter was a disaster, but what matters is the forward outlook. Companies that can successfully shake off the depressing holiday season should move higher.

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