With the third-quarter earnings season almost nearing its end, the focus has largely shifted to the Retail sector. Retailers operating brick-and-mortar stores have been witnessing a decline in footfall due to the increasing preference for online purchases. Nonetheless, higher consumer spending might help the retail sector to witness an improvement in the coming quarters.
Per our Earnings Preview report as of Nov 18, earnings for the total S&P 500 companies will improve 3.6% from the year-ago period, with total revenue rising 1.5%.
As per the report, out of the 476 S&P 500 companies that have come up with their quarterly numbers, approximately 73.1% posted positive earnings surprises, while 55.5% beat top-line expectations. Total earnings for these index members were up 4% from the year-ago quarter, while revenues increased 2.6%.
Out of 36 retail companies on the S&P 500 index (43 in total), 61.1% have posted an earnings beat, while 44.4% surpassed revenue estimates. While total earnings for these 36 retailers were up 7.4% from the year-ago quarter, revenues increased 4.9%.
So, let’s see what awaits the following apparel stocks within the Retail/Wholesale sector that are queued up for third-quarter earnings releases on Nov 22.
Chico's FAS Inc. (CHS - Free Report) commenced fiscal 2016 on a soft note, delivering a negative earnings surprise of 19.4% in the first quarter. However, it bounced back with a positive earnings surprise of 13.6% in the second quarter.
Our proven model does not conclusively show that this retailer of exclusively designed, private label casual clothing and related accessories is likely to beat earnings estimates in third-quarter fiscal 2016. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Chico's currently has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents. It carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
While a favorable Zacks Rank increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.
Chico's remains focused on its cost control and operating efficiency endeavors. However, owing to a tough retail environment and sluggish traffic, the company had projected comparable store sales (comps) to decline in the low single-digit range in the second half of the fiscal year. (Read more: Will Chico's Repeat its Earnings Beat Trend in Q3?)
Next, let’s take a sneak peek at DSW Inc. (DSW - Free Report) , which outperformed the Zacks Consensus Estimate by an average of 24% in the trailing four quarters.
This specialty branded footwear retailer has an Earnings ESP of -8.16% for third-quarter fiscal 2016 as the Most Accurate estimate is at 45 cents while the Zacks Consensus Estimate is pegged at 49 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Finally let’s take a look at lifestyle specialty retailer Urban Outfitters Inc. (URBN - Free Report) that surpassed the Zacks Consensus Estimate by an average of 6.7% in the trailing four quarters.
The company has an Earnings ESP of -2.27% for third-quarter fiscal 2017. This is because the Most Accurate estimate is at 43 cents and the Zacks Consensus Estimate is pegged at 44 cents. It carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Urban Outfitters remains committed toward improving comps, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands, and optimizing the inventory level. The company intends to increase wholesale operations and augment e-Commerce activities. However, fashion obsolescence remains the primary concern for Urban Outfitters' business model. (Read more: Urban Outfitters Q3 Earnings: What's in the Cards?)
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