by Jon Ogg | February 23, 2010 4:13 am
If you thought that digesting same-store sales from retailers was a concentrated effort, wait until you see how many major retail stocks are on deck with earnings this week. The Street already saw a very disappointing forecast last week from Wal-Mart (WMT), but this week’s round of earnings is so overloaded with retail reports that it is going to feel like Christmas all over again.
Lowe’s Companies (LOW) managed to beat earnings today at $0.14 EPS vs. $0.12 estimates from Thomson Reuters. The company said that the worst is behind them and that they even expect 1% to 3% growth in same-store sales throughout 2010. The company also said it would spend up to $5 billion for share buybacks. Unfortunately, the real guidance is soft, and this has set up a dull reception for Home Deport (HD) who reports on Tuesday.
Home Deport (HD) will report earnings before the market open on Tuesday. Thomson Reuters has estimates of $0.17 EPS on $14.07 billion in revenues. If the company offers up guidance for 2010 (actually Jan-2011), the consensus estimate is $1.73 EPS on $66.43 billion in revenues. While that represents 10% earnings growth, it is only about 1.5% for expected sales growth.
Department store retailer Nordstrom (JWN) reported after the close on Monday. Earnings estimates were $0.77 EPS vs. $0.79 EPS estimates from Thomson Reuters. There was some hope for upside to those numbers, and with shares above $36 today, JWN stock is up literally over 200% from last year’s lows. That 200% gain is somewhat of a norm if you can believe it, but that sets the bar high. The company has a great mix and is a prized retailer, but it will need to blow the hinges off the doors to keep most investors from wanting to take profits. Nordstrom is showing 2% to 4% same store sales gains expected for 2010 and just put forward earnings (Jan-2011) at $2.35 to $2.55 EPS versus Thomson Reuters’ estimates of $2.41 EPS. It isn’t as if the numbers are bad, but a selling reaction has so far been seen, and the mid-point P/E ratio is looking like 14.7-times forward earnings.
Sector Review – 2010 Targets for Department Store Retailers
On Tuesday morning Macy’s (M) reports. Thomson Reuters has estimates of $1.32 EPS and $7.85 billion in revenues. Macy’s shares face the same issue as JWN shares; M shares are north of $18, and while are strong sales expectations, the stock has rallied 200% from last year’s low. With estimates at $1.57 EPS for next year, Macy’s trades at a cheap 11.8-times forward earnings estimates. Nordstrom may have just set the bias against it, but at least the valuation is not out of the park.
The earning feud between Sears (SHLD) and Target (TGT) also takes place on Tuesday. Sears is expected to report earnings of $3.54 EPS and revenues of $12.9 billion. Like Macy’s and Nordstrom, SHLD shares have run up 200% from last year’s lows. At around $95.50 it may sound like a bargain compared to the $106.06 high the stock reached January. Wall Street has gotten used to hearing awful data from the company and then seeing the shares rise. But the most recent guidance was very positive considering that it was Sears. The problem with Sears is that analysts have been way off the mark both up and down. This can be seen in the share valuation, as the $2.41 EPS target from Thomson Reuters generates a forward P/E ratio of 39.5. It still has all those assets to monetize down the road, but that valuation and a history of major misses makes it hard to have a great handle on Sears.
Target (TGT) feels like a bargain as the stock is only up 100% from its 52-week lows with shares trading around $50. But it is also less than $2.00 below its 52-week highs. Estimates here are $1.16 EPS and $20.13 billion in revenues. Investors are going to want to see upside here, and they are expecting that Wal-Mart’s weakness was in part due to customers who were forced into the trade-down of Wal-Mart going back over to Target now that the economy is not in the abyss. In case Target gives any guidance, its estimates from Thomson Reuters in the coming quarter are $0.76 EPS and $15.36 billion in revenues, and next year estimates are $3.64 EPS and $67.78 billion in annual revenues. Target is trading at 13.9-times the coming year’s EPS estimates.
TJX Companies, Inc. (TJX) is on deck Wednesday morning. Thomson Reuters is expecting $0.91 EPS and $5.98 billion in revenue from TJX. With Marshall’s and T.J. Maxx, it is the king of the clearance-sale items for apparel and home items. TJX is “only” up around 100% from the lows of 2009. At $39.36, it trades at about 13-times earnings for the year ahead, giving what still does not feel like an expensive stock for a company that has proven in good times and bad times that it can keep much of its customer base.
Sak’s (SKS) also reports Wednesday before the open and is perhaps the biggest wild card of them all. It is low-priced as a stock, and thinly covered by Wall Street. Thomson Reuters has -$0.02 EPS expected with $799 million in revenues, but a whisper is out for positive earnings. The other problem is that Wall Street expects a loss a year out as well at -$0.18 EPS. On top of that, the stock is up over 400% from last year’s lows. Carlos Slim is a large holder, and many investors hope the company will be taken over. Of all the department store retailers covered this week, Saks is the one that has the highest chance of being either a huge winner or a huge loser.
Kohl’s (KSS), reporting on Thursday morning, is often considered a trade-down but it may just be the new normal. Thomson Reuters has estimates pegged at $1.37 EPS and $5.67 billion in revenue. Kohl’s is trading around $51, and that gives it a forward multiple of 14-times the $3.63 EPS target for Jan-2011. Looking at the performance of the stock, Kohl’s looks to be at the largest discount from its 52-week highs.
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