In recent economic developments we have witnessed an abysmal drop in US Consumer Confidence. It recently fell to a five-year low of 85.7 in April. Since then, this crucial bellwether has seen a slow but noticeable recovery. Yet still, it is still over 60 percent below the levels seen at the start of this year. Industry analysts are definitely watching these developments. They may have a huge impact on the next earning reports from larger retailers such as Dick’s Sporting Goods and JD Sports.
Our friends at Dicks Sporting Goods are preparing to release their Q2 earnings any day now. The company finds itself in an especially punishing market, with a high bar for earnings expectations. This follows on the heels of other wider consumer sentiment measures that can impact retail performance. At the same time, JD Sports, whose share price has flat-lined of late, may be about to get a second wind. It intends to announce its Q2 figures on August 26 or 27. With this news we will get some compelling clues as to its competitive standing in the market.
In addition to these retail developments, a certain technology company, called Nvidia, is grabbing headlines. Its extraordinary valuation has quickly risen over $4 trillion. Even more alarming for Nvidia, this high valuation is causing concerns amongst investors that the company is entering bubble territory. The company recently announced a whopping $4.5 billion write-down on its H2O stockpiles. This huge loss appears in the wake of recent US restrictions on chip sales to China, further complicating its financial state. Nvidia has already experienced the negative impact of these prohibitions in Q1, and further tightening of scrutiny on its business practices is arriving.
Of all the retail actors, Best Buy continues to be the most surprising and successful. Aside from a sharp sell-off in April, its trading range has held relatively firm between $60 and $80. The company as of late August had just reaffirmed its full-year profit guidance of $13.80 to $14.20 in earnings per share. And then there’s Best Buy, which last week described its Q1 revenues of $44.1 billion as indicative of a “70%/117% year-over-year increase.”
Foot Locker is at the cusp of a big transformation as Dicks Sporting Goods looks to buy out Foot Locker. This agreement should close by the end of this fiscal year. This multi-billion dollar acquisition may have large implications for the competitive landscape in the retail sector, particularly within sporting goods.
The US economy has rebounded unexpectedly quickly. In Q2, the economy turned around with a vengeance, coming in at an annualized growth rate of 3%. This increase fueled a broader economic growth of 1.1% in the first half of the year. A major worry about inflation continues, as the Federal Reserve will proceed with caution due to new tariff regimes laying the groundwork for permanent inflationary effects.