For Immediate Release

Chicago, IL – May 22, 2025– Zacks Director of Research Sheraz Mian says, "Total earnings for Retail sector companies already reported are up +11.5% from the same period last year on +5% higher revenues, with 56% beating EPS estimates and 52% beating revenue estimates"

A Closer Look at Retail Earnings

Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

• Total Q1 earnings for the 469 S&P 500 members that have reported results are up +11.5% from the same period last year on +4.3% higher revenues, with 74.2% beating EPS estimates and 62.5% beating revenue estimates.
• Companies struggled to beat consensus estimates this reporting cycle, with the Q1 EPS and revenue beats percentages for this group of 469 index members tracking below what we had seen from the group in other recent periods, as well as the average for this group over the preceding 20-quarter period.
• For the Retail sector, we now have Q1 results from 96% of the sector's members in the S&P 500 index. Total earnings for these Retail sector companies are up +11.5% from the same period last year on +5% higher revenues, with 56% beating EPS estimates and 52% beating revenue estimates.
• The +11.5% earnings growth pace for these Retail sector companies drops to a decline of -5.2% once Amazon's substantial contribution is excluded. The EPS and revenue beats percentages for the group are materially below historical averages for this same group of Retail sector companies.

Retail Sector Earnings – Walmart vs. Target

The earnings focus lately has been on the Retail sector, withTarget (TGT Quick QuoteTGT - Free Report) becoming the latest big-box retailer to come out with results, which follows results from Walmart (WMT Quick QuoteWMT - Free Report) , TJX Companies (TJX Quick QuoteTJX - Free Report) and others.

Target found a way to come up short of even the materially lowered estimates, which has become almost a recurring theme for them in the post-COVID period. They have been steadily losing ground, with Walmart and Amazon making inroads into its market share.

Walmart, on the other hand, can't seem to do anything wrong, with its growing digital business not only providing an efficient channel to monetize its essentials-centric merchandise and attract an ever-growing share of the high-income households but also opening up growth opportunities in high-margin activities like advertising, third-party marketplace, and even data.

Part of Target's problems is a result of consumer spending trends that have shifted away from the company's discretionary merchandise. It has an essentials business like groceries as well, but that business is far smaller than Walmart's. While roughly 60% of Walmart's revenues comes from its essentials merchandise, the ratio for Target is roughly 20%.

While there is no question that the operating environment for vendors of discretionary-type merchandise remains difficult, Target's persistent run of weak quarterly results likely also reflects company-specific execution issues. After all, rivals like TJX are doing a lot better with comparable merchandise, and even Walmart is able to show better results in its general merchandise business than Target.

Evolving Expectations for 2024 Q2 and Beyond

The start of Q2 coincided with heightened tariff uncertainty following the punitive April 2^nd tariff announcements. While the onset of the announced levies was eventually delayed for three months, the issue has understandably weighed heavily on estimates for the current and coming quarters.

The expectation at present is for Q2 earnings for the S&P 500 index to increase by +5.5% from the same period last year on +3.8% higher revenues.

While it is not unusual for estimates to be adjusted lower, the magnitude and breadth of Q2 estimate cuts are greater than we have seen in the comparable periods of other recent quarters.

Since the start of the quarter, estimates have come down for 15 of the 16 Zacks sectors, with the biggest declines for the Transportation, Autos, Energy, Construction, and Basic Materials sectors. The only sector experiencing favorable revisions in this period is Aerospace.

Estimates for the two largest earnings contributors to the index – Tech & Finance – have also declined since the quarter began.

Tech sector earnings are expected to be up +12.1% in Q2 on +9.8% higher revenues. While these earnings growth expectations are materially below where they stood at the start of April, the revisions trend appears to have notably stabilized lately, as we have been flagging in recent weeks.

The Tech sector is much more than just any another sector, as it alone accounts for almost a third of all S&P 500 earnings.

The Earnings Big Picture

While estimates for this year have been under pressure lately, there haven't been a lot of changes to estimates for the next two years at this stage.

Stocks have recouped their tariff-centric losses, although the issue has only been deferred for now. While some of the more dire economic projections have eased lately, there is still plenty of macro uncertainty that will likely continue to weigh on earnings estimates in the days ahead, particularly as we get visibility on the tariffs question.

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