A Brilliant Day For Retail Earnings

A big day for retail earnings reports today kicks off with department store major Macy’s ( (NYSE:M) ) ahead of the bell, as well as economic metrics hitting the tape at the Fed will be looking closely, specifically Initial Jobless Claims and July’s Producer Price Index (PPI). Let us begin.

On the headline, Zacks Rank #3 (Hold)-rated Macy’s beat earnings estimates by 2 cents to 48 cents per share. However, strip away debt repurchases, non-cash settlements and stock-based compensation and this result reduces to 38 cents per share. Revenues clearly came in ahead of expectations to $5.55 billion from $5.50 billion in the Zacks consensus estimate.

Macy’s shares are up 2.5% following the earnings report, as the company has also reaffirmed full-year 2017 guidance for both sales and earnings, and plan no additional enhancements before the end of the year. Remember the retailing giant is in the processing of shuttering some stores nationwide, which is helping keep down costs as online retail continues its seep into brick-and-mortar institutions.

Another department-store retailer, Kohl’s ( (NYSE:KSS) ), beat estimates on both top and bottom lines this morning: $1.24 per share beat the $1.19 we were looking for, and revenues of $4.144 billion topped the $4.138 billion expected. Year-over-year comps were down in the quarter 0.4%, though compare this to the -2.7% in Q1, and Kohl’s business looks to be picking up a bit sequentially.

And Zacks Rank #3-rated Dillard’s ( (NYSE:DDS) ) posted a surprise loss in the quarter, swinging to -58 cents per share as opposed to the +19 cents expected. Sales came in slightly under expectations to $1.427 billion from the Zacks consensus estimate of $1.435 billion. Shares are tumbling more than 13% following the earnings release.

Continuing the retail earnings narrative after today's close, we await results from Zacks Rank #2-rated Nordstrom ( (NYSE:JWN) ).

Thursday Econ Data

As we see every Thursday morning, Initial Jobless Claims hit the tape ahead of the opening bell. Again we see sub-250K new claims: 244K last week is up from the slightly upwardly revised 241K the previous week. Continuing claims continued to dwindle further south of 2 million to 1.951 million; the prior week posted 1.967 million.

And July PPI showed much weaker-than-expected results, swinging to a loss in the month to -0.1% — analysts had been looking for +0.2%. Ex-food & energy is still -0.1%. Year over year, PPI is 1.9% (1.8% ex-food & energy). These figures are all well off expectations; we had been looking for year-over-year PPI growth definitely over 2%. Trade was down 0.5%, Transportation -0.8%, Energy -0.3. All of this amounts to lower-than-expected inflation building on the enterprise side. Tomorrow brings the Consumer Price Index (CPI) results, so we’ll see how these numbers line up.

These numbers, of course, help prognosticators understand when the next Fed rate hike will take place. Currently, chances of a September hike are extremely low compared to earlier this year, and numbers like today’s PPI will not change this. Even December — considered by many economists to be the most likely time for a rate hike in the medium-term, has also slipped to just under a 34% chance. Meaning we may see interest rates stay pat for the remainder of 2017; as long as inflation metrics continue to look weak, this is what we most likely will see.