Retailers brace for first earnings drop since pandemic

Jharonne Martis, Director Of Consumer Research At LSEG, explains why retail earnings could get ugly.

Transcript

00:00What's the takeaway about the consumer right now?

00:02The consumer is watching and is very careful about what is going to happen with the economy.

00:07They are very worried about how much their pricing power is going to be, what the value

00:11is going to be in terms of like, are the prices going to continue to rise, inflation, what

00:17this means for my cost of living, and therefore they're being more discerning and more cautious

00:20about where they're spending.

00:21So as we see the trade wars continue to progress and see more of the numbers coming in in August,

00:29then we're going to see how things will moderate with the consumer.

00:32So far the LSEC estimate predicts low earnings growth rates for the second half of the year,

00:39which is a big change from the previous two years where we saw double-digit growth in earnings.

00:45So we're seeing a deceleration and for the very first time we're seeing a negative growth

00:49for the second quarter, the first negative showing since the pandemic.

00:53So retailers are also being very cautious.

00:56So retailers don't typically report until later in the season.

00:59It sounds like we have to prepare for some kind of downbeat news.

01:02Yes, they've already been warning us not to expect too much from them.

01:05In fact, when we look at our guidance, we have received more negative guidance in terms of

01:09earnings, expectations, outlook, and also revenue outlook, more so than we have in previous

01:14quarters.

01:15And therefore analysts pulled by LSEC correspondingly have been lowering their earnings estimates forecast,

01:22especially for the second quarter, which is expected to be down 1.7%, first negative showing

01:27since the pandemic.

01:28And then we're expected to see low single-digit growth for the second half of the year, underlining

01:34again that the consumer is very much concerned about what's going to happen with pricing

01:39and they're very, being very value conscious.