Big box retail earnings on deck: LNK's Manny Chirico on what to expect

Retail Performance & Expectations - Retailers are expected to meet or exceed Q3 numbers with clean inventories [3] - A more challenging holiday season is anticipated, with sales estimates ranging from 0% to 2%, contrasting with the general estimate of +4% [3][4] - The compressed holiday season and market uncertainty may lead to increased promotional activity, potentially pressuring earnings [3][4] Consumer Behavior & Market Dynamics - Consumer anxiety is heightened by government shutdowns and interest rate concerns, impacting discretionary spending on apparel, accessories, and electronics [5] - Consumers are trading down, favoring retailers with strong value messages like Costco, Walmart, and TJX [6] - Luxury brands and niche markets with strong brand recognition, such as Dick's Sporting Goods and Abercrombie & Fitch, are expected to perform well [7] Challenges & Cost Pressures - Department stores, including Macy's and Kohl's, are expected to face a tough environment; Target's turnaround is not expected in the short term [8][9][10] - Consumers are feeling the impact of inflation, particularly in supermarkets, despite a slight easing of cost pressures from a high of 9% to around 3% [12][13] - Tariffs are exacerbating the situation, with retailers having absorbed much of the impact on discretionary items; further tariff increases are expected to worsen the situation next year, with rates potentially reaching 15% to 25% in some sourcing countries [13][14]