Corporate Earnings, Inflation & Ukraine

Ahead of handicapping the outlook for the 2022 Q1 period, we want to recap the 2021 Q1 earnings season, with a particular focus on how the Retail sector performed.

Total Retail sector earnings in 2021 Q4 were up +39.9% on +7.5% higher revenues, meaning a strong 140 basis point expansion in net income margins.

With respect to how the group handled inflationary pressures, the picture was generally mixed. Some operators like Target TGT and Walmart WMT did really well, while others like Home Depot HD and Lowes LOW struggled with these forces. With respect to department stores, the market liked what it saw from Nordstrom JWN, but that was likely more a function of low expectations following the company’s persistent underperformance in recent quarters.

For 2022 Q1, the expectation is for S&P 500 earnings to increase +3.8% on +10.1% higher revenues, implying a compression in net margins.

For more details about the Q1 earnings season and the overall earnings picture, please check out our weekly Earnings Trends report here >>>Pressure on Earnings Estimates: What Sectors Are Most Affected?

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