A host of retail companies including Walmart, Home Depot and Lowe’s release quarterly results next week, and Morgan Stanley is preparing some preliminary reports. Analysts at the bank are predicting more earnings shorting and retailers will continue to downgrade their annual outlook as high inflation, global economic uncertainty and supply chain issues continue. continues to affect consumers and companies. Kimberly Greenberger wrote in an August 5 note: “After a strong start to Q2 of 22, we observed store traffic, consumer spending, and macro decelerations. broader scale”. “This suggests that retailers’ June/July sales growth has decelerated from the May trend, and therefore Q2 22nd revenue may decline.” Unexpected earnings In addition, retailers may have to reduce the price of slow-moving inventory, which affects gross margins and puts additional pressure on wages and other costs due to inflation. . Given this backdrop, Greenberger expects lower-than-expected earnings from companies on the board. “Going into ’22, a common restraint from companies in our coverage was the expectation of holding on to sales/margin margins,” Simeon Gutman wrote in a note Monday. COVID-driven earnings with structurally higher EPS recovery”. “However, approaching Q2 Mega Cap earnings, about half of the companies in our coverage have downgraded their 22-year outlook. It seems inevitable that negative revisions will be inevitable. more to come.” The good news is that many retailers’ share prices fell ahead of earnings, according to analysts, reflecting some of the difficulties these companies faced in the past quarter. Shares of Morgan Stanley’s insured soft-chain fell another 10% in the second quarter after falling 21% in the first quarter. Top outlook However, investors will likely be sensitive to company announcements about their full-year outlook and the plans they make for how they will manage their inventory going forward. . Investors will also listen closely to what retailers have to say about future price cuts, as well as the consumer trends they are seeing. These are likely to be headwinds in the second half of the year, adding to the pressure retailers faced in the first two quarters, Gutman wrote. “There will be few companies that are immune to all these factors,” he said. Morgan Stanley is bracing for potential downward guidance revisions from multiple companies including Walmart, Lowe’s and Target. Walmart alread y cut its quarterly and full-year guidance last month. Target and Lowe’s are set to report earnings on Wednesday. Walmart’s numbers are scheduled for release on Tuesday.
