When retail earnings season kicks into high gear this week, you may be tempted to panic.
After reporting in May their worst results since the recession, department stores are again expected to lead off the flood of earnings reports on an alarming note. Of all 15 subcategories tracked by Retail Metrics, department stores are presumed to have generated the worst results. In fact, they're the only group that's expected to have lost money.
Sears accounts for the lion's share of that assumption, with Retail Metrics calling for it to squander nearly $400 million. As a whole, department stores are expected to be $104 million in the red. While that would be a slight sequential improvement from their $120.5 million first-quarter loss, every department store — save for J.C. Penney and Bon-Ton — is expected to post weaker results.
"This same group kicked off the [first-quarter] retail reporting season in May with less than stellar results that initiated a brief period of 'the sky is falling' mentality," Retail Metrics President Ken Perkins said. "We may be setting up for a similar scenario here in August and would not necessarily read through tough department store results."
That's not to say things are looking rosy for the overall retail space. The 116 companies tracked by Retail Metrics are expected to report a 1.9 percent drop in second-quarter earnings year over year. That compares with a first-quarter increase of 2.1 percent from the prior year.
Macy's and Kohl's are the first major department stores on deck, with both releasing results early Thursday. Macy's management has already warned that sluggish sales and piled-up inventories would dent its sales and gross margins during the second quarter. The international tourism slowdown that dinged Kate Spade last week added another headwind, as many Macy's locations cater to these shoppers.
Macy's lowered the bar for its full-year results back in May, when it reported its steepest quarterly comparable-sales decline since the 2009 recession.