Week in Preview: Abercrombie, Lowe's and Other Retail Earnings

Trey Thoelcke
Updated

Last week, Macy's (M) and JCPenney (JCP) kicked off the retail earnings season by posting better-than-expected earnings for the most recent quarter. Many more quarterly reports from retailers are due this week, and by and large expectations of analysts surveyed by Thomson Reuters are high.

Walmart (WMT), the king of retailers, is expected to buck the trend, though. Analysts anticipate that the Bentonville-based company will report that its third-quarter earnings grew only 6.7% year-over-year to 90 cents per share. During the three months that ended in October, Walmart announced an acquisition in South Africa and kicked-off the holiday shopping season, and revenue for that period is predicted to have risen 3.0% to $102.4 billion.

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Looking ahead to the fourth quarter, analysts so far expect sequential and year-over-year growth of both earnings and revenue. Walmart results have not fallen short of consensus estimates in the past five quarters.

Walmart's long-term EPS growth forecast is 10.2%, and its forward price-earnings (P/E) ratio is 12.9, which is less than its trailling P/E and the industry average. The dividend yield is 2.2% and the return on equity (ROE) is 20.9%. The First Call recommendation is to buy WMT, and the mean price target is $59.89 per share. Minyanville thinks WMT is better than bonds. At $54.13, shares are a couple of bucks lower than the 52-week high but 7.3% higher than three months ago.

Abercrombie & Fitch Co.

The expectations are different for Abercrombie & Fitch (ANF), which saw stronger-than-expected back-to-school sales during its third quarter. The consensus forecast calls for earnings for that period to have jumped 41.2% from a year ago to 51 cents per share. The Ohio-based specialty retailer is also expected to post revenue of $881.3 million for the three months that ended in October, which is 16.9% more than in the same period of 2009. Sequential and year-over-year growth of both earnings and revenue are anticipated in the fourth quarter, as well. Abercrombie's earnings results have been better than expected in recent quarters.

The long-term EPS growth forecast is 23.0%, which is higher than that of competitors American Eagle Outfitters (AEO) and the Gap (GPS). Abercrombie's forward P/E ratio is 23.2, but that's less than the trailing P/E of 29.8. The PEG ratio is 1.0 and the dividend yield is 1.5%. The consensus recommendation is to buy ANF, despite a recent downgrade. The mean price target is $47.96 per share. Shares have risen 22.0% in the past three months and ended the week at $45.92.

Lowe's Companies

Big-box home improvement retailers Home Depot (HD) and Lowe's (LOW) are expected to report strong results as well. For a third quarter in which Lowe's launched in-store recycling centers and increased the number of its board members, it is expected to post EPS of 30 cents. That's up from a year-ago profit of 24 cents per share. And revenue for the three months that ended in October is expected to have increased 3.3% to $11.8 billion. Looking ahead to the full year, analysts foresee earnings of $1.41 per share (+11.3%) on revenue of $48.9 billion (+3.7%). The per-share earnings results have met or topped analysts' expectations in the past five quarters.

Lowe's long-term EPS growth forecast of 14.1% is better than larger rival Home Depot. Lowe's forward P/E ratio is 14.1, which is less than its trailing P/E of 16.8. The PEG ratio is 1.0 and the dividend yield is 1.8%. The Motley Fool likes the stock for its dividend. The consensus recommendation has been to buy LOW for more than 90 days, and the mean price target is currently $25.60. Shares have traded mostly between $20 and $23 since June and closed Friday at $21.69.

Target Corporation

During the three months that ended in October, Minneapolis-based Target (TGT) announced it would offer iPads and Facebook gift cards. The nation's second-largest retailer is expected to post EPS for that period of 69 cents, a year-over-year rise of 15.9%. And its third-quarter revenue is estimated to have increased 2.2% to $15.6 billion. Analysts also predict sequential and year-over-year growth of both earnings and revenue in the fourth quarter. Earnings results have bested consensus estimates in four of the past five quarters.

Target's long-term EPS growth forecast is 12.9%, which is greater than Walmart's. The forward P/E ratio of 13.2 is less than the industry average. The PEG ratio is 1.0, the dividend yield is 1.5% and the ROE is 17.5%. The analysts' consensus recommendation remains to buy TGT. The Motley Fool called Target an undervalued dividend champion. The mean price target is $62.68. But shares have faced resistance at $55 since May, and ended last week at $54.19.

And also ...

Other retailers expected to post double-digit EPS growth this week include American Eagle Outfitters (AEO), America's Car-Mart (CRMT), AnnTaylor (ANN), Dollar Tree (DLTR), Gamestop (GME), Gap (GPS), Gymboree (GYMB), Limited Brands (LTD), Nordstrom (JWN), PetSmart (PETM), Ross Stores (ROST), Saks (SKS), TJX Cos. (TJX) and Urban Outfitters (URBN).

Earnings from Staples (SPLS) are anticipated to be about the same as a year ago, while earnings are expected to be smaller for BJ's Wholesale (BJ), the Buckle (BKE), Children's Place (PLCE), Hot Topic (HOTT) and Kirkland's (KIRK). And losses are predicted from Cost Plus (CPWM) and Sears (SHLD).

Also, retail sales number for October are scheduled for release on Monday. Other economic data due this week include:

  • Monday: Business inventories (Sept.), New York Empire State Manufacturing Index

  • Tuesday: Producer Price Index (Oct.), NAHB Housing Market Index

  • Wednesday: Consumer Price Index (Oct.), housing starts (Oct.), real earnings (Oct.)

  • Thursday: Philly Fed Survey, Conference Board Leading Economic Indicators Index (Oct.)

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