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If you thought Walmart and Target had disappointing results, these retailers did so much worse

By Philip van Doorn

Rising expenses and inflation are hurting retail companies. As a result, analysts are lowering their price targets for their stocks.

Retail stocks fell hard this week as bellwether companies disappointed investors with sagging profits.

And now, a review of retailers sheds light on companies that put up worse numbers than those reported by Target Corp. (TGT) and Walmart Inc. (WMT), both of which shook the industry and dimmed investor sentiment in the past two days.

So a list of retailers that have reported declining comparable-store sales is below.

Latest retail flop:Kohl's reports wide profit miss, says additional buyout bids are due in weeks

Bulging inventories

One might expect companies growing same-store sales during a period of high inflation to book higher profits, but that is not what has been happening for the two retail giants:

It takes time for such large companies to make adjustments, but at least they have remained profitable. But the continued profitability for Target and Walmart wasn't enough to keep the S&P 500 consumer discretionary sector from falling 6.6% on May 18.

Possible overreaction?

Following the price declines and cuts to analysts' earnings estimates for the next 12 months, shares of Target now trade at a forward price-to-earnings ratio of 13.3. That compares to forward P/E ratios of 18.5 for Walmart and 16.7 for the S&P 500 Index , according to FactSet.

In a note to clients on May 18, Jefferies analyst Stephanie Wissink pointed out that Target's success during the coronavirus pandemic led to some difficult comparisons as the economy was opening up. But she also wrote that this period could be a "perfect storm" for the company, with a "surge in costs to move goods for a goods-intensive business," the end of federal stimulus for consumers and a "directional normalization in category mix." She stuck with her neutral rating on Target's stock, but lowered her price target for the shares to $168 from $252.

Taking a more positive tone, Ally Financial Chief Markets and Money Strategist Lindsey Bell wrote in an email that Target's results showed "a resilient customer," while confirming a shift in spending to "experience-based" items, such as luggage and toys.

Bell noted that Target had maintained its sales outlook amid a "tradeoff" as consumers look to cut spending on necessities in favor of spending on "services and experiences."

Her comments following the Target report built upon similar remarks after Walmart and Home Depot Inc. (HD) increased their sales guidance. However, Bell also wrote that "investors will likely remain nervous about how long this consumer resiliency [during this period of high inflation] can last."

The 'worst' of retail

The following stock screen begins with the S&P Composite 1500 Index , which is made up of the S&P 500, the S&P 400 Mid Cap Index (MID) and the S&P Small Cap 600 Index .

Same-store or comparable sales are reported by retailers, but also restaurant operators and a few other industries, such as car dealers. So the first cut brought the list down to 110 companies.

Fiscal calendars vary greatly, so it is never accurate to say that any earnings season is over. The following list begins with Target and Walmart, but then includes the 15 companies that reported declines in same-store sales from a year earlier, for their most recently reported fiscal quarters reported through May 18, according to FactSet:

Company                               Ticker  Same-store sales growth  Estimated same-store sales growth -- Q1  Estimated same-store sales growth -- Q2  Estimated same-store sales growth -- Q3  Estimated same-store sales growth -- Q4 
Target Corporation                     TGT                       3.3%                                    3.5%                                    3.0%                                    4.2%                                    3.0% 
Walmart Inc.                           WMT                       3.0%                                    4.6%                                    2.6%                                    3.7%                                    3.2% 
Bed Bath & Beyond Inc.                 BBBY                    -12.0%                                  -18.0%                                   -7.9%                                   -1.0%                                    2.0% 
Sleep Number Corp.                     SNBR                    -11.0%                                    2.5%                                    4.7%                                   15.0%                                    9.0% 
Shoe Carnival Inc.                     SCVL                    -10.6%                                   -1.1%                                    2.2%                                    4.0%                                    3.0% 
Ollie's Bargain Outlet Holdings Inc.   OLLI                    -10.5%                                  -14.8%                                    0.0%                                    5.5%                                    6.0% 
CarMax Inc.                            KMX                      -6.5%                                  -11.5%                                    0.1%                                   -3.4%                                    8.1% 
Lowe's Cos. Inc.                       LOW                      -4.0%                                    2.5%                                    1.5%                                    1.0%                                    3.3% 
Domino's Pizza Inc.                    DPZ                      -3.6%                                   -4.4%                                    0.5%                                    2.8%                                    4.3% 
LL Flooring Holdings Inc.               LL                      -3.6%                                   -2.0%                                    4.0%                                    5.0%                                    4.0% 
Bath & Body Works Inc.                 BBWI                     -3.5%                                    0.1%                                    0.5%                                    1.1%                                    7.0% 
Big Lots Inc.                          BIG                      -2.3%                                  -11.2%                                   -0.3%                                    1.5%                                    3.6% 
Best Buy Co. Inc.                      BBY                      -2.3%                                   -8.6%                                   -4.7%                                   -1.1%                                    2.8% 
Dollar General Corp.                    DG                      -1.4%                                   -1.2%                                    2.6%                                    3.9%                                    4.2% 
Rent-A-Center Inc.                     RCII                     -1.1%                                   -2.7%                                   -1.7%                                   -1.3%                                    2.0% 
Hibbett Inc.                           HIBB                     -1.0%                                  -19.8%                                   -5.9%                                    3.7%                                    7.8% 
Carter's Inc.                          CRI                      -0.5%                                    3.5%                                    0.0%                                    0.7%                                     N/A 
                                                                                                                                                                                                                      Source: FactSet 

Click on the tickers for more about each company.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

The first data column includes the companies' reported changes in comparable-store sales for the most recent reported quarters. The next columns are consensus estimates for the next four quarters among analysts polled by FactSet.

Some of the companies are expected to show impressive recoveries in same-store sales over the next year, following recent declines. The analysts expect improvement next quarter for both Target and Walmart, with a rather consistent set of estimates across the board.

Between May 18 and early May 19, the consensus price target for Target's stock fell by 21%. The consensus target price for Walmart declined 6% for two days following its earnings annoucnement. Here's a summary of analysts' opinions about the same 17 stocks:

Company                               Ticker  Share "buy" ratings  Share neutral ratings  Share "sell" ratings  Closing price -- May 18  Consensus price target  Implied 12-month upside potential 
Target Corp.                           TGT                    63%                    34%                    3%                 $161.61                 $210.69                                30% 
Walmart Inc.                           WMT                    75%                    25%                    0%                 $122.43                 $156.25                                28% 
Bed Bath & Beyond Inc.                 BBBY                   11%                    42%                   47%                   $8.90                  $11.54                                30% 
Sleep Number Corp.                     SNBR                    0%                    83%                   17%                  $41.82                  $51.00                                22% 
Shoe Carnival Inc.                     SCVL                  100%                     0%                    0%                  $26.49                  $51.00                                93% 
Ollie's Bargain Outlet Holdings Inc.   OLLI                   38%                    39%                   23%                  $43.46                  $52.46                                21% 

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05-21-22 1253ET

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