NEW YORK — The kickoff of the third-quarter earnings season begins today for top retailers, and at least one major equity firm is forecasting that Kohl’s Corp., J.C. Penney & Co. Inc., Nordstrom Inc. and Target Corp. will be a few of the big winners.
Federated Department Stores is to release results today while Target and Kohl’s post earnings Thursday. On deck is Wal-Mart Stores, Saks Inc., J.C. Penney and Nordstrom, which report next week.
“Going into earnings season, Kohl’s, J.C. Penney, Target and Nordstrom should all benefit from strong positioning, merchandising and inventory control,” Bill Dreher, broadlines equity analyst at Deutsche Bank, said in a research note Tuesday. “These are our focus stocks, with Kohl’s being our top pick here.”
Dreher said broadline retail inventories “are in good shape, due to their investments in systems as well as improvements in the timing and flow of inventory receipts.” This should “counterbalance any gross margin pressure from the late arrival of sales.”
The analyst said October same-store sales results came in “stronger than expected,” which tempered concerns that shoppers were slowing their spending. Results were bolstered by “seasonally appropriate temperatures, pent-up demand for apparel and [accelerated sales of] seasonal merchandise in the final 10 days of October, which started the retail rally last week,” Dreher said, adding that “luxury consumer spending remained very strong.”
With the holiday shopping season looming, Dreher said the consumer “is likely to spend less this holiday season, largely as a result of gasoline and home heating oil inflation.” However, with the late back-to-school selling season last month, “we are likely to see more holiday gifts of apparel.”
Federated was not included in Dreher’s report. According to Thomson Financial, analysts expect the retailer to post earnings per share of 23 cents, which is between the retailer’s own estimate of 20 to 25 cents. Sales are expected to rise 63 percent to $5.7 billion.
The third-quarter earnings per share compare with 42 cents last year. The decline in EPS and gain in sales is attributable to Federated’s recently completed acquisition of May Department Stores.