Brian Sozzi Discusses Retail Earnings

Brian Sozzi of Wall Street Strategies is out with a research report on

, and he is saying that results have been somewhat better than expected, which is a pleasant surprise. In a note to clients, Sozzi writes, "Those who were bracing for doom and gloom from 2Q earnings reports by retailers thus far have to be pleasantly surprised. Across the broad spectrum of retailers I compiled data on, from footwear to furniture, revenue, gross margin, operating income, and earnings per share are soundly beating consensus forecasts following a worrying start to the year." Sozzi goes on to note that 69% of companies have beaten revenue, gross margin, and operating income estimates. 61% have beaten earnings per share estimates. In the report, Sozzi says, "Now, there a couple of ways to interpret the data. Let's begin with the positive. In spite of dreary readings on the jobs market and a softening in the government's monthly retail sales numbers, retailers have managed to expand their top lines by: (1) price increases with no material harmful impact to volume; (2) international, with surprising resilience from Europe; and (3) e-commerce momentum. Reviewing the best in breed reports from the most recent quarter from the likes of Nike (

), Wolverine Worldwide (

), Under Armour (

), Apple (

), and Tempur Pedic (

), they contain all of these positive attributes or at least one that makes up for limitations elsewhere (Tempur Pedic not a big player internationally, but sells a premium priced product to a receptive high-end U.S. consumer). Additionally, expenses continue to be tightly managed, compounding the success further up the income statement." He concludes the note by saying, "All in, pleasant start to the reporting season for the sector, but I continue to urge investors to wear the stock picker's cap. The data also fleshed out, unsurprisingly, that any retailer whose fortunes are leveraged to middle to low income households will have a rough go fundamentally and with matching reduced expectations by the Street."