Introduction

Our weekly Earnings Insights reports look at key commentary and qualitative insights from major US retailers and brand owners on their recent revenues and comps, and the impact of the Covid-19 pandemic on 1Q22 performance (ended April 30, 2022, for most companies). Companies featured are those on our Coresight 100 list, and we focus on those that reported in the week ended May 1, 2022. For most US retail companies covered in this series, the quarter under review will be 1Q22. In January 2022, US retail sales increased by a revised 9.4% year over year, suggesting that the economy is continuing to grow despite inflation and concerns of a looming recession. In February 2022, US retail sales increased by a revised 13.1% year over year, boosted by another strong month of job creation, as average hourly wages continue to rise within the still-tight labor market. In March 2022, US retail sales increased by 4.0% year over year, against strong 2021 comparatives. However, 4.0% growth amidst a backdrop of high inflation points to a slowdown in consumer spending. US retail traffic saw growth of 16.5% year over year in March 2022—lower than February’s growth of 31.9%, with trends affected by intense winter storms. We assess the recent performance of selected retailers below.

Apparel and Footwear Brand Owners

	Columbia Sportswear Company (NasdaqGS: COLM) 1Q22
Commentary	Columbia Sportswear’s first-quarter net sales increased by 22.0% year over year, compared to 23.0% growth in the prior quarter. Diluted EPS increased by 23.0% year over year. Gross margin declined by 170 basis points (bps) year over year to 49.7% due to high inbound freight costs, unfavorable year-over-year changes in inventory provisions, unfavorable regional sales mix and lower wholesale product margins, despite high direct-to-consumer (DTC) product margins. Both DTC and wholesale sales increased by 22.0% year over year. Within the DTC business, brick-and-mortar sales also increased by 22.0% and e-commerce sales increased by 21.0% year over year. By region, US sales increased by 23.0% year over year. Latin America and Asia Pacific region sales increased by 14.0% year over year. China’s sales were flat in the quarter as favorable cold weather sales conditions were offset by recent mandatory quarantines amid the region’s ongoing Covid-19 outbreak. Japan’s sales increased by mid-teens percentage, reflecting favorable weather in early 2022. The Europe, Middle East and Africa (EMEA) region’s sales increased by 42.0% year over year, driven by robust sales growth in both the Europe DTC and EMEA distributor businesses. Growth was broad-based across the outerwear, footwear and sportswear categories. According to the company, SOREL was its fastest-growing brand in the 1Q22, with sales increasing by 37.0% year over year, followed by Columbia, which reported a sales increase of 22.0%. The company’s emerging brand, Prana’s, sales increased by just 4.0% year over year, constrained by the late delivery of its spring 2022 inventory. On the innovation front, Columbia Sportswear’s spring 2022 product line includes the launch of several new technologies and products. It introduced its OutDry Extreme mesh fabric, which features more breathability and waterproofness, and no added perfluorinated chemicals (PFCs). In footwear, it launched Tech live Plush, a cushioning foam that improves heel-to-toe transition and comfort over uneven terrain. It has also combined two warm weather technologies in the new Ice Hoodie— Omni-Shade Sun Deflector and Omni-Freeze ZERO Ice—to deflect light, cool the body and wick moisture away.
Outlook	Columbia Sportswear still expects full-year 2022 net sales growth of 16.0%–18.0% year over year, even after removing any future sales to its Russian-based distributor from its outlook (a 2.0% headwind to full-year 2022 consolidated net sales). Meanwhile, the company raised its EPS guidance and now expects diluted EPS of $5.70–6.00, compared to $5.50–5.80 in the prior guidance, representing 6.9%–12.6% growth from last year. The company expects its gross margin to decline 130 bps year over year to 50.3% and its operating margin to be 13.2%–13.6%, compared to 14.4% in 2021. For the second quarter of fiscal 2022, Columbia Sportswear anticipates mid-single-digit sales growth and near breakeven earnings year over year due to the removal of fall 2022 shipments from the company’s Russia-based distributor and the impact of China’s rise in Covid-19 cases.
	Levi’s (NYSE: LEVI) 1Q22
Commentary	Levi’s reported revenue growth of 22.0% year over year—in line with its 22.0% growth in the prior quarter—driven by strong growth across all geographical segments. Adjusted EPS increased by 35.3% year over year. The company’s adjusted gross margin increased by 170 bps year over year to 59.4%, driven by a higher mix of sales from DTC, price increases and lower promotions. DTC net revenues increased by 35.0% year over year, driven by growth in company-operated stores and e-commerce, which grew by 48.0% and 10.0%, respectively. As a percentage of total revenues, sales from DTC stores and e-commerce comprised 30.0% and 9.0%, respectively. By geography, the Americas’ net revenue increased by 26.0% year over year, driven by growth across DTC and wholesale channels. Europe’s net revenue increased by 13.0% year over year, driven by company-operated stores as pandemic-led restrictions loosened, allowing consumers to return to stores. Asia’s net revenue increased by 11.0% year over year, driven by growth across DTC and wholesale channels. Levi’s is experiencing exceptional growth in men’s bottoms, with sales growth of 24.0%, the category’s highest first-quarter revenue in over a decade. Levi’s women’s bottoms sales also continue to grow, with sales up 21.0% year over year, and Levi’s 501 series sales were up 50.0% in the quarter, demonstrating consumers’ love for the brand’s most iconic product.
Outlook	Levi’s reaffirmed its fiscal 2022 expectations of net revenue growth of 11.0%–13.0% year over year, reaching $6.4–6.5 billion. The company expects an adjusted EPS of $1.50–1.56 in fiscal 2022, representing 2.0%–6.1% growth year over year. To drive e-commerce growth, the company plans to expand the availability of its Levi’s app, which provides customers with early access to product launches, exclusive content and offers. The app will debut in India and several European countries in the second quarter of 2022, with further global expansion later in the year.
	Skechers U.S.A., Inc. (NYSE: SKX) 1Q22
Commentary	Skechers’ sales increased by 26.8% year over year, versus 24.4% growth in the prior quarter. The company saw a 28.7% increase in domestic sales and a 25.5% increase in international sales year over year, driven by wholesale sales. Both the wholesale and DTC segments experienced growth, at 32.7% and 15.7% year over year, respectively. Diluted EPS increased by 22.2% year over year, while gross margin declined by 250 bps year over year to 45.3% due to high per-unit freight costs. By region, the Americas sales increased by 31.0% year over year, driven by significant improvement in the pace of the company’s inbound receipts and outbound shipments to wholesale customers. EMEA sales increased by 49.0% year over year, reflecting a recovery in many markets that were heavily impacted by the pandemic. In the Asia Pacific region, sales increased by 4.0% year over year, led by 9.0% growth in China, though partially offset by Covid 19-induced weakness in several adjacent markets. The rollout of Skechers’ new e-commerce platform continued in the 1Q22 with the launch of new websites in France and Spain. According to the company, more markets are planned for 2022, including several in Europe. The company also continues to invest in its DTC capabilities, upgrading its point of sale (POS) systems in Japan and Belgium, with the rest of Europe to be upgraded by the end of the third quarter of fiscal 2022. Skechers opened 31 company-owned stores, including 13 in the US and seven in China, in the 1Q22. It closed 41 locations in the quarter, including 12 in the US and seven in China.
Outlook	For the second quarter of 2022, the company believes it will achieve sales of $1.7–1.8 billion, representing growth of 5.4%–8.4% year over year, and diluted EPS of $0.50–$0.55, a decline of 37.5%–43.2% year over year. For the full year 2022, the company expects sales of $7.2–7.4 billion, representing growth of 14.3%–17.5% year over year. Diluted EPS is expected to be between $2.75 and $2.95, a decline of 37.6%–41.9% year over year. Skechers anticipates that its gross margins will be down compared to last year, both in the second quarter and the full year, as freight costs will offset improved pricing. However, it expects its gross margins to improve over the year as its previously-introduced wholesale pricing takes effect.

 

Beauty Brands and Retailers

	L'Oréal S.A (ENXTPA: OR) 1Q22
Commentary	L’Oréal reported a 19.0% year-over-year increase in revenues versus 15.4% growth in the prior quarter. Comp sales increased by 13.5% year over year. All divisions grew at a double-digit pace year over year: the professional products division recorded 22.7% year-over-year sales growth; consumer products sales increased by 11.1%; L’Oréal Luxe’s sales were up 25.1%; and active cosmetics sales grew by 22.4%. By channel, there was a clear revival in offline sales, which showed a comp sales growth of 15.0%. Meanwhile, e-commerce sales grew by 8.0% and represented 25.8% of quarterly sales. Travel retail sales increased by 19.0%, boosted by a sharp sales rebound in Europe and continued double-digit sales growth in Asia. By geography, Latin America achieved the fastest sales growth at 33.9% year over year, North America’s sales increased by 21.5% and Europe’s sales increased by 15.8% year over year. North Asia reported 18.0% year-over-year sales growth, led by double-digit sales growth in Mainland China. Sales in the South Asia Pacific, the Middle East, North Africa and Sub-Saharan Africa region were up 18.7%, with strong performances in India and the Gulf countries. At 40.0%, L’Oréal’s fragrance business doubled global fragrance growth (20.0%), as the company is benefitting from the beauty products premiumization trend. Cosmetics are rebounding in Europe and the US—where mass and luxe provide the strongest benefits.
Outlook	The company did not provide the financial guidance for fiscal 2022; however, it remains optimistic about the beauty market’s outlook in the coming months.

 

CPG

	Kimberly-Clark Corporation (NYSE: KMB) 1Q22
Commentary	The Kimberly-Clark Corporation’s total revenues increased by 7.0% year over year, versus 2.7% growth in the prior quarter. Comparable sales increased by 10.0% year over year, driven by an increase in net-selling price. Adjusted EPS decreased by 25.0% year over year. The company’s adjusted operating profit declined by 21.8% year over year. The company stated that the results were impacted by $470 million worth of higher input costs—most notably pulp and polymer-based materials, distribution and energy cost increases. By region, North America’s comp sales increased by 13.0% year over year in the consumer products segment and 5.0% year over year in the K-C professional segment. Outside North America, comp sales increased by 10.0% in developing and emerging (D&E) markets and 8.0% in developed markets. By segment, personal care sales increased by 11.0% year over year. Consumer tissue and K-C professional sales both increased by 4.0% year over year. During the quarter, building on its portfolio of period and light bladder leakage solutions, the company acquired a majority stake in Thinx Inc., a company that produces reusable period and incontinence underwear, for total consideration of $181 million.
Outlook	Kimberly-Clark raised its sales and comp guidance for full-year 2022 and now expects net sales to grow by 2.0%–4.0%, compared to its prior guidance of 1.0%–2.0%, year over year. Meanwhile, it expects comp growth to be 4.0%–6.0%, compared to its previous guidance of 3.0%–4.0%, year over year. The company expects adjusted operating profits to be down low-to-mid-single-digit year over year and EPS to be in the range of $5.60–$6.00, representing 4.1%–11.5% growth year over year. Kimberly-Clark expects costs to remain elevated or increase for most inputs, including polymer-based materials and pulp, distribution and energy, for full-year 2022.

 

Drugstore

	Walgreens Boots Alliance (NasdaqGS: WBA) 2Q22
Commentary	Walgreens Boots Alliance reported revenue growth of 3.8% year over year on a constant-currency basis, versus 7.6% growth in the prior quarter. Adjusted EPS was up by 26.5% year over year on a constant-currency basis. By geography, US sales increased by 1.2% on a constant-currency basis, while US comp sales increased 9.5% year over year. Adjusted gross profits increased by 13.7%, driven by strong retail sales growth and Covid-19 vaccinations and testing. US adjusted operating income increased by 36.5%, while international sales increased by 7.5% year over year on a constant-currency basis. Adjusted gross profit increased internationally by 15.2% year over year, reflecting strong UK growth of 15.2%, notably from higher retail store transactions. Adjusted operating income internationally was up by 60.7% year over year. Walgreens’ digital sales increased by 38.0% year over year in the US, and same-day pickup orders accelerated to 3.9 million orders. The company enrolled over 96 million people in myWalgreens—a membership program where members receive Walgreens cash rewards on eligible purchases—with 11 million joining since the fourth quarter of fiscal 2021. During the second quarter of fiscal 2022 (ended February 28, 2022), Walgreens administered 11.8 million Covid-19 vaccinations and 6.6 million Covid-19 tests in the US.
Outlook	The company reiterated its full-year guidance for adjusted EPS and now expects it to grow by a low-single-digit percentage. However, it raised its guidance for its base business from 5.0%–7.0% growth to 6.0%–8.0% year over year, reflecting strong US front-of-store sales performance and increased Covid-19 testing revenue.

 

E-Commerce

	Amazon (NasdaqGS: AMZN) 1Q22
Commentary	Amazon reported 7.0% year-over-year revenue growth, compared to 9.4% growth in the prior quarter. The company reported EPS of $(7.56) for the 1Q22, compared to $15.79 in the same quarter of the last year. Operating income decreased by 58.4% year over year to $3.8 billion. In Amazon’s retail segments, first-party online sales declined by 3.0% year over year, physical store sales increased by 17.0% and third-party seller services sales increased by 7.0%. At constant currency, first-party online sales turned negative, with growth of (1)%; last quarter, Amazon eked out 1% constant-currency growth in this segment. Amazon Web Services (AWS) sales grew by 37.0%, while advertising sales increased by 23.0% to $7.9 billion. In the quarter, the company introduced its automated “Just Walk Out” technology—which enables shoppers to enter a store, take what they want and leave without checking out—at two Whole Foods Market stores in Washington, D.C., and Sherman Oaks, California. Just Walk Out technology also rolled out new third-party locations inside LaGuardia Airport and UBS Arena in New York City, and Minute Maid Park in Houston, Texas. During the quarter, Amazon opened eight new Amazon Fresh grocery stores, bringing the total number worldwide to 46. The newest Amazon Fresh store in Seattle is the world’s first grocery store seeking the zero-carbon certification from the International Future Living Institute.
Outlook	The company expects its net sales in the second quarter of fiscal 2022 to be in the range of $116.0–121.0 billion, representing 3.0%–7.0% year-over-year growth, although the company anticipates an unfavorable impact of around 200 bps due to foreign exchange rates. Operating income is expected to be $(1.0)–$3.0 billion, compared with $7.7 billion in the second quarter of 2021. The guidance includes an expectation that the company will incur approximately $4.0 billion of incremental costs due to inflation, labor shortage and supply chain constraints in the second quarter.

 

Food Retailers

	Albertsons Companies, Inc. (NYSE: ACI) 4Q21
Commentary	Albertsons Companies’ total revenues increased by 10.1% year over year, accelerated from 8.4% growth in the prior quarter, while comparable sales increased by 7.5% year over year. Digital sales increased by 5.0% year over year and adjusted EPS increased by 25.0% year over year. The company’s gross margin declined by 20 bps year over year to 28.7% due to increased product costs driven by the inflationary environment and high supply chain costs. Membership in the company’s Just for U Loyalty Program—a free loyalty program that allows customers to receive personalized deals, earn points on all eligible purchases and redeem points for various discounts—increased by 18.0% year over year to 30 million members. The company’s fresh department comp sales outpaced center store sales by 280 bps year over year, as the company automated production planning and simplified tasks in its fresh departments, resulting in better quality, higher in-stock rates and more time for customer interactions. Albertsons’ nine owned brands saw strong growth and improved margins. Its sales penetration—how much customers are using a product or service compared to the total estimated market for that product or service—reached 25.6% in the 1Q22, with the strongest performances in the floral, deli and meat departments.
Outlook	Albertsons raised its comp sales guidance for fiscal 2022 and now expects comp sales growth in the range of 2.0%–3.0% year over year compared to prior guidance of (0.8)%–(1.2)%. It expects EBITDA in the range of $4.2–$4.3 billion and adjusted EPS of $2.70–$2.85, representing a decline of 7.2%–12.1% year over year. The company expects to spend $2.0–$2.1 billion in capital expenditures in fiscal 2022.

 

Home and Home-Improvement

	Tractor Supply Company (NasdaqGS: TSCO) 1Q22
Commentary	Tractor Supply Company reported an 8.3% year-over-year increase in revenue—versus 15.3% growth in the prior quarter—while comp sales increased by 5.2% on top of 38.6% comp sales growth last year. Diluted EPS increased by 6.5% year over year. Gross margin rate declined by 29 bps year over year to 34.9% due to high product and transportation costs inflation. Operating profits increased 6.0% year over year. Tractor Supply Company management noted that the consumable, usable and edible (CUE) category experienced strong demand. These products are need-based and demand-driven, meaning they drive trips to stores. The CUE sales growth was almost three times that of the company’s overall sales growth rate. Meanwhile, the company saw double-digit year-over-year e-commerce growth, and its mobile app now represents more than 15.0% of its digital sales. Tractor Supply Company’s Neighbor’s Club program reached 24.8 million members in the quarter, an 24.0% increase year over year. Tractor Supply’s new store openings were delayed during the quarter by prolonged impacts from the pandemic and challenges facing the construction industry.
Outlook	Tractor Supply Company reiterated its fiscal 2022 financial outlook and continues to expect sales of $13.6–$13.8 billion, representing growth of 6.8%–8.4% compared to fiscal 2021. Comparable sales are expected to grow between 3.0% and 4.5% year over year. The company expects its operating margin to be 10.2% and its EPS between $9.20 and $9.50, representing growth of 6.9%–10.3% compared to fiscal 2021. Fiscal 2022 consists of 53 weeks, one week more than fiscal 2021. The company estimates the benefit of the 53rd week is anticipated to be worth around 1.5 percentage points of net sales and a $0.15 contribution to EPS in fiscal 2022. The company continues to target opening between 75 and 80 new Tractor Supply stores in fiscal 2022.

Looking Forward

Apparel and footwear brand owners continue to witness strong revenue growth, with Columbia Sportwear Company, Levi’s and Skechers all reporting double-digit sales growth year over year. However, gross margins remain negative for Columbia Sportswear and Skechers due to high inflation. All three companies expect net sales growth in double-digits for fiscal 2022. Columbia Sportwear raised its EPS guidance and now expects high-single-digit to double-digit percentage growth year over year. Beauty brand owner L’Oréal reported strong double-digit sales and comps growth year over year. The company did not provide financial guidance for fiscal 2022; however, it remains optimistic about the outlook for the beauty market in the coming months. CPG company Kimberly-Clark reported high-single-digit sales growth year over year. For full-year 2022, the company raised its sales and comps guidance and now expects net sales growth of low-to-mid-single digit year over year and comp growth of mid-to-high-single-digit year over year. Due to high input costs, it expects adjusted operating profits to be down low-to-mid-single digit year over year. Drugstore Walgreen Boots Alliance reported low-single-digit sales growth year over year. The company expects adjusted EPS growth of low-single-digit percentage year over year and raised its guidance for base business from mid-to-high-single-digit growth to high-single-digit growth year over year, reflecting strong US front-of-store sales performance and increased Covid-19 testing revenue. Although e-commerce player Amazon posted high-single-digit sales growth year over year, it continues to witness its online store segment sales decline. The company expects its year-over-year revenue growth in the second quarter of 2022 to be low-to-high-single-digit. In its latest quarter, food retailer Albertsons posted double-digit sales growth year over year. For fiscal 2022, the company raised its comp sales guidance and now expects comp sales growth of low-single-digit year over year. In the home and home-improvement retail sector, Tractor Supply Company reported another strong quarter with high-single-digit revenue growth year over year and mid-single-digit comparable sales growth. For fiscal 2022 the company expects sales growth of high-single-digit year over year and comp sales growth of low-to-mid-single-digit year over year. Meanwhile, it plans to continue to expand its store network.