Tiffany & Co (NYSE:TIF)
Consumer Discretionary - Specialty Retail | Reports May 25, before the open.
The Estimize consensus is calling for earnings of 69 cents per share on $922.7 million in revenue, a penny higher than Wall Street on the bottom line but $2.5 million below on the top. Earnings per share estimates have dropped 13% in the past 3 months on negative sentiment heading into the Q1 report. Compared to a year earlier, this reflects a 15% decline in EPS with revenue projected to fall 4%.
What to Watch: In the past few years, demand for jewelry has substantially declined, led by a strong U.S. dollar, weakness in China and changing spending habits. Consequently, jewelers like Tiffany have seen earnings fall for 4 consecutive quarters. The stock hasn’t been too far behind, down 25.6% over the same time frame.
For Tiffany, currency headwinds negatively impact both non-U.S. sales and tourist spending in the United States. Early indications are these problems will persist throughout fiscal 2016. In its most recent analyst call, management guided minimal growth on a constant currency basis with earnings ranging from unchanged to a mid-single digit decline.
On the other hand, there are a number of bright spots for Tiffany. The company’s efforts to bolster its omnichannel platform and open new stores should bode well. Meanwhile, on a constant currency basis, sales and comparable store sales increased across its international markets: Asia-Pacific, Japan and Europe. Taking currency headwinds into account, this turns negative across the board.
Abercrombie & Fitch Company (NYSE:ANF)
Consumer Discretionary - Specialty Retail | Reports May 26, before the open.
The Estimize consensus calls for EPS of -$0.50, in-line with Wall Street. Revenue expectations are slightly more bearish at $703.5 million vs. the sell-side’s $707.35 million. However, these numbers have been trending upward since the last quarterly report, with EPS estimates increasing 8% and revenues up 1%. This puts YoY growth expectations at 8% for EPS and 0% for sales. This is a company that has historically beaten on the bottom-line in 71% of reported quarters, yet only 35% of the time on sales.
What to Watch: The teen retailer that was long hated by Wall Street and teens alike seems to be continuing on it’s road to recovery in Q1. After parting ways with its founder and CEO in 2014, Abercrombie has ushered a new wave of change in the past two years. The company has moved away from its notoriously sexy image, to better position itself in the rapidly changing fashion industry.
In the fourth quarter, the company saw comparable store sales increase 1%, the first positive report for that metric in 2015. While the namesake Abercrombie stores posted negative SSS throughout the year, subsidiary Hollister began offsetting that weakness in the second half of 2015. Hollister has now been repositioned to compete in the burgeoning fast fashion segment. The move into fast fashion should provide Abercrombie an edge over its competitors and also drive top line expansion. Currency headwinds will still remain challenging for ANF.
Splunk Inc. (NASDAQ:SPLK)
Information Technology - Software | Reports May 26, after the close.
The Estimize consensus is calling for flat YoY earnings, as compared to -$0.02 from Wall Street. Revenue expectations of $179.0 million are nearly $5M above the sell-side. Estimates on both the top and bottom-line have seen massive upward revisions since the Q4 2015 report, with EPS expectations increased 92% and revenues 8%. This pegs YoY EPS growth at 102% and sales growth at 41%. SPLK historically has beaten both EPS and revenue estimates more than 73% of the time.
What to Watch: Splunk, a software provider for searching, monitoring and analyzing machine generated big-data, reports on Thursday. As the analytics market continues to gain strength, especially in the enterprise space, Splunk has no doubt benefitted, becoming especially popular within financial services as the company offers advanced security analytics data. Splunk has been expanding these cyber security offerings, acquiring two companies in the industry, Caspida and Metaphor Software, last year.
Despite the upward trajectory, Splunk has some stiff competition. The company’s rival, ELK Stack, an open source stack company, has been gaining massive global traction and is starting to become a threat. Even bigger players like Amazon (NASDAQ:AMZN), IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT) are fighting for more market share. Investments into R&D in order to compete with these players may suppress profitability in the near term.
GameStop (NYSE:GME)
Consumer Discretionary - Specialty Retail | Reports May 26, after the close.
The Estimize consensus is calling for earnings of 62 cents per share on $1.95 billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top. Since the holiday season, earnings estimates have fallen 11% while revenue has dropped 8%. Year-over-year comparisons are now projecting a 9% decline in profitability with sales dropping as much as 5%. Despite poor earnings, the stock is a positive mover during earnings season, increasing 4% in the month following results. This should comfort shareholders who have withstood the 30% losses of the past 12 months.
What to watch: Despite the overall strength in the gaming industry, GameStop earnings have been quite volatile. Revenue has hovered around the mid single digits to negative growth primarily due to weaker software sales, a transition to digital offerings, and increased competition.
GameStop’s biggest concerns have been increased competition and a shift in demand for digital offerings. Major video game publishers including Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO) have all addressed digital downloads as a high-growth area. As these companies transition away from physical games, retailers like GameStop should see sales fall. Meanwhile, retail giants such as Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Best Buy (NYSE:BBY) have all entered in the video-game market.
In its Q4 analyst call, first quarter and fiscal 2016 guidance was quite bleak. The first quarter is forecasted to see sales fall in range of 4 to 7%. Comparable store sales could fare even worse, predicted to fall between 7 and 9%. On the year, however, best case has sales increasing 3% and flat comparable store growth. Additionally, the company expects new software sales to decline between 5% and 10%.
Ulta Salon Cosmetics & Fragrance (NASDAQ:ULTA)
Consumer Discretionary - Specialty Retail | Reports May 26, after the close.
The Estimize community calls for EPS of $1.33, 4 cents above Wall Street. Revenue expectations from Estimize are also higher at $1.038 billion as compared to the Street’s $1.033 billion. Estimates have remained relatively flat over the last 3 months, with EPS expected to increase 27% and sales anticipated to rise 19% YoY. The retailer has a great history of beating, surpassing the Estimize EPS consensus in 82% of reported quarters and revenues 71% of the time.
What to Watch: Despite the current slump for apparel and accessories retailers, the beauty space remains hot and tends to be recession proof. Macy’s (NYSE:M), which bought special beauty brand BlueMercury in 2015, and JC Penney (NYSE:JCP), which has ramped up its in-store Sephora counters, both reported their respective beauty businesses as some of best performing of all segments in Q1. Ulta should benefit from the same sending trends that favor skincare and cosmetic offerings.
Ulta is coming off its 9th consecutive quarter of beating on both the top and bottom line. The recent string of strong performances can be attributed to robust online traffic and sales. Overall in Q4 2015, online sales grew 44.2% sustained by effective use of targeted emails and promotions. Last quarter, the beauty products retailer posted a 12.5% increase in comparable sales (stores that have been open at least 14 months and e-commerce) in which retail SSS were up 10.4%. Strength has been driven by an increase in transactions and average ticket price. Salon sales for the company’s in-store hair salons also saw robust growth of 16.7% last quarter and are expected to be a bright spot again in Q1.
Fragrances were a source of concern in 2015, with the category turning sharply negative. However, Ulta’s market position, strategic outlook, and burgeoning cosmetics and beauty care products should be enough to mask the uncertainty in its sluggish fragrances segment.