Q2 GDP Revised to 2.0%, Plus Q2 Earnings: BBY, DG & More

Thursday, August 29, 2019

Ahead of the penultimate trading day of August this year, and ahead of the long Labor Day holiday weekend, we see a few economic data points which may be of some interest to investors. We also see a sweep-up of late-reporting retailers in their fiscal Q2 earnings releases, with mostly good results.

The first revision on Q2 Gross Domestic Product (GDP) slipped, as expected — from 2.1% originally reported to 2.0% this time around. Personal Consumption actually gained 40 basis points to 4.7% in the quarter, making up for lack of growth in other areas of the economy. Averaged out with the 3.1% reported for Q1, we’re currently on pace for 2.5% growth for 2019, slightly below the 2.9% we saw in full-year 2018.

There will be one more revision to Q2 GDP, then we start getting hard numbers for Q3. But with slowing global growth, it would be a lot to ask the U.S. consumer to bring the domestic economy back up toward 3% growth.

Initial Jobless Claims are still well within parameters consistent with a healthy U.S. labor market: 215K was 4000 claims higher than the upwardly revised 211K reported the previous week. These reads have been remarkably steady over the past several years week by week, even with more volatile reads in monthly jobs tallies (of which we expect the next report a week from tomorrow).

Continuing Claims have also remained consistent: 1.698 million longer-term jobless claims was up slightly from the previous week’s 1.676 million. We’ve only seen this read tick over 1.7 million twice since the beginning of June, and longer-term results remain at their lowest levels since before “yacht rock” was a thing.

Advance Trade in Goods was lighter than expected: -$72.3 billion for the month of July was better than the -$75 billion analysts were expecting and the originally reported -$74.4 billion. Post-sales inventory numbers came in-line with expectations. We bottomed out in December of last year at -$79.49 billion, but have stayed at lower levels generally over the past few years.

Q2 Retail Earnings Roundup

Best Buy BBY
reported a mixed Q2 report prior to today’s opening bell, beating bottom-line expectations of 99 cents to $1.08 per share (and above the 91 cents reported in the year-ago quarter). Revenues were just shy of the $9.54 billion Zacks consensus estimate, and the company has only missed earnings expectations once in the past five years.

Yet Best Buy shares are selling off 5.6% in today’s pre-market, responding to missed comps and a wavering outlook, depending on how the trade war transpires. That said, the company did raise full-year earnings guidance. However, after heading up 30% year to date, some traders are taking profits on the quarterly report. For more on BBY’s earnings, click here.

Dollar General DG demonstrated strength in lower-end retail for its fiscal Q2 report: $1.74 per share was well ahead of the $1.58 expected and the $1.52 reported a year ago. Revenues of $6.98 billion rose 1.33% from the Zacks consensus, on better comps and raised guidance. Shares had risen 30.5% from the start of the year, and are up another 8% in this morning’s early session. For more on DG’s earnings, click here.

Not to be outdone, Dollar Tree DLTR posted 76 cents per share on $5.74 billion in quarterly sales, up 6 cents and 0.35%, respectively. These numbers, however, compare to year-ago prints of $1.15 per share and $5.53 billion. Shares had been up 10.3% year to date ahead of this report, and are +5% in the pre-market. For more on DLTR’s earnings, click here.

However, Abercrombie & Fitch ANF missed estimates on both top and bottom lines this morning for its fiscal Q2 report: 48 cents per share was a 4-cent miss, and sales of $841 million was 1.5% beneath expectations, as well as the $842.4 million from the year-ago quarter. Comps and forecasts were both cut on tariff fears, which look to have a negative affect on apparel retail, going forward. Shares were already down 15% from the beginning of the year, and have dropped another 12% in today’s early market. For more on ANF’s earnings, click here.

Mark Vickery
Senior Editor

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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