Thursday's Market Minute: Retailers on A Roll

Department store retailers Kohl’s KSS and Macy’s M reported stellar earnings this morning before markets opened, revealing confident consumer shopping habits in the third quarter. Three months of strong retail sales reports reinforce this. As reported on Tuesday, October’s headline number grew by 1.7%, beating the 1.0% consensus, and continues a trend of better-than-expected sales since August. This bodes well for the big retailers at least ahead of the shopping season – which we’ll see reflected in their 4Q earnings – as ongoing supply chain disruptions weigh more heavily on smaller companies.

Cowen analysts also say the retail sector is “primed for a robust holiday,” with mid-November retail sales currently running four standard deviations above long-term trends. Macy’s and Target TGT – which reported strong 3Q sales on Wednesday – are among the firm’s top picks for earnings revisions as “holiday season share gainers.” The analysts say this holiday season could be the strongest in 20 years but have reservations for next year as port delays and inventory levels normalize while supply chain inflation and labor costs rise. Shares of both KSS and M are higher in premarket trading after both companies beat analyst expectations on the top and bottom lines and raised guidance.

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