Click here for the Baird Retail Earnings Scorecard, summarizing earnings reports across the sector.
In addition, below are some key themes our research team is highlighting with the earnings season largely complete:
- The consumer is strong. The consumer spending backdrop has been favorable through 2018 (low unemployment, high consumer confidence, tax cut tailwinds), supporting stronger growth across Softlines compared to recent years.
- Tactical adjustments to sector positioning. Q2 earnings results reinforced existing positioning in the group, which continues to favor the discounters and home improvement stores, while avoiding the sporting goods and home furnishings players.
- Operating from position of strength in 2018. While current valuation metrics are broadly supported by fundamentals, potential shifts in sentiment or rotations away from the group are possible after strong sector performance YTD.
- Retail traffic worth monitoring heading into 2019. The improvement in retail and restaurant traffic trends in 2018 has been fueled in part by consumer tax cuts and has room for further expansion. However, there is some risk that retail traffic declines could steepen once the benefit of tax cuts is cycled in 2019.
- "Experiences" vs. "Things." In 2018 YTD, spending on "things" is tracking above spending on "experiences," further expanding on the trend seen in 2017. Last year, spending on "things" outpaced spending on "experiences" for the first time since 2013.
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