US Retailers Set For Earnings Test In Wake Of JC Penney Collapse

By Glenn Dyer | More Articles by Glenn Dyer

A massive week for the US retail sector ahead with most majors – and a few middle rankers – due to report their March quarter figures. Judging by the retail sales data for March – a slide of 8.3% – the reports won’t be healthy – except for giants like Target and especially Walmart.

The US March reporting season is in its last throes as most of the 500 companies in the S&P 500 have reported.

Up to late last week 451 of the companies in the S&P 500 had reported. Of those, 66.7% have beaten (lowered) consensus, according to Refinitiv data, Reuters reported.

In aggregate, earnings for the first three months of the year are now forecast to be down 12.1% from the year-ago quarter, a stark reversal from the 6.3% annual growth rate forecast at the start of the year.

But this week sees two of the giants of the retail sector (and S&P group) report – Walmart and Target – lead reports from around a dozen or so major chains. Besides the big two, reports are expected from TJX companies, Ross Stores, Foot Locker, Macy’s (first quarter sales update only), Kohl’s, Best Buy, Home Depot, Lowe’s, McKesson, Shoe Carnival, L Brands and Boot Barn.

But the retail reporting week was overshadowed on Friday by the new that the century plus old JC Penney had collapsed and filed for bankruptcy protection, the 4th major US retailer to have failed in the current crisis.

Penney, had been struggling for years but a month ago it missed a debt repayment as the impact of the lockdowns worsened an already difficult situation for the retailer.

The one month debt grace period expired late last week and the the retailer put itself into Chapter 11 bankruptcy, unable to meet its debts.

For now the retailer will continue to trade, but some stores are closing already, which is not good news for its 85,000 employees

Department store chain Penney joined other national chains, J Crewe and Neiman Marcus (the upscale department store chain) in Chapter 11, along with luxury men’s clothing group, John Varvatos.

Retail sales fell 16.4% in April, by far the largest monthly drop on record. That followed an 8.3% (revised from a fall of 8.7%) in March, the previous record.

The US Commerce department data shows the dollar value of sales for the month were back to 2012 levels (without factoring in the impact of inflation).

Like March, some of the in individual categories in April were staggering. Restaurants and bars lost half their business over two months. At furniture and home furnishings stores, sales were off by two-thirds.

At clothing stores, the two-month decline was 89%. Increased sales from online retailers didn’t come close to offsetting the downturn in bricks and mortar stores, so the quarterly reports this week will be poor (except for Target and Walmart) but the June quarter will be worse, even for the big two.

Apart from the retailers, the other major report this week is expected from farm equipment group, Deere& Co.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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