Introduction Our weekly Earnings Insights reports look at key commentary and qualitative insights from major US retailers and brand owners on their recent performance, in terms of revenues and comps, and the impact of the Covid-19 pandemic on fourth-quarter 2021 performance (ended January 31, 2022, for most covered companies). Companies featured are those within our Coresight 100 coverage list, and we focus on those that reported in the week ended January 30, 2022. For most US retail companies covered in this series, the quarter under review will be the fourth quarter of fiscal 2021 (4Q21). In October 2021, US retail sales saw a double-digit year-over-year increase, fueled by strong growth in several sectors, and sales increased by 23.2% on a two-year basis. In November 2021, US retail sales continued to see double-digit growth, with sales increasing by a strong revised 14.7% year over year and revised 24.7% on a two-year basis. In December 2021, US retail sales increased by 13.3% year over year and 22.3% on a two-year basis. However, sales growth slowed sequentially in December 2021 possibly reflecting some shopping pulled forward into November 2021. US retail traffic saw growth of 32.6% year over year in December 2021, lower than November’s growth, reflecting a trend towards the consolidation of shopping trips due to the increasing number of Covid-19 cases. We assess the recent performance of selected retailers below.

Apparel and Footwear Brand Owners

	Levi Strauss & Co (NYSE: LEVI) 4Q21
Commentary	Levi’s reported revenue growth of 22.0% year over year or 7.0% versus the corresponding quarter in 2019. Adjusted EPS increased by 105.0% year over year and up 58.0% on a two-year basis. Direct-to-consumer (DTC) net revenues increased by 25.0%, driven by growth in company-operated stores and e-commerce, which grew 28.0% and 22.0%, respectively. As a percentage of fourth-quarter company net revenues, sales from DTC stores and e-commerce comprised 30% and 8%, respectively. By geography, Americas’ net revenues grew 12% on a constant-currency basis, driven by growth across all channels. Europe’s net revenues grew 3% and Asia’s net revenues declined 2% on a constant-currency basis. The company continues to increase its share in women's jeans in the US and has achieved significant traction engaging Gen Z consumers through programs such as Levi's SecondHand recommerce initiative wherein customers can drop off their used clothing at designated stores to receive gift cards for future purchases. Through the “Buy Better Wear Longer” campaign, the company raised awareness regarding the responsibility on the environmental impacts of apparel production and consumption and encouraged customers to wear each item longer. Looser fits continue to increase in penetration, representing roughly half of Levi’s women's and men's bottoms assortments. Levi’s is seeing growth in tops business, driven by solid performance in men's wovens and sweatshirts and strong momentum across women’s wovens, dresses and outerwear.
Outlook	Levi’s expects its net revenues to grow 11.0%­­–13.0% in fiscal 2022 compared to fiscal 2021, reaching net revenues of $6.4–6.5 billion. The company expects to achieve an adjusted EPS of $1.50–1.56 in fiscal 2022, representing growth of 2.0%–6.1% year over year. Gross margin is expected to expand by around 15–30 basis points year over year. To drive e-commerce growth, the company has accelerated investments to evolve its distribution network with plans to open two new distribution centers in 2022. In 2021, the company successfully migrated its US West Coast e-commerce fulfillment to its owned and operated distribution center in Nevada and now has plans to build a new distribution center for digital on the East Coast. The company is also building a highly automated, highly sustainable, owned and operated omnichannel facility in Germany that will be operational by 2024.

Drugstore Retailers

	Walgreens Boots Alliance (NasdaqGS: WBA) 1Q22
Commentary	Walgreens Boots Alliance reported revenue growth of 7.6% year over year on a constant-currency basis, reflecting solid growth in US retail market and substantial recovery in the international market. Adjusted EPS was up by 53.0% year over year on a constant-currency basis. By geography, US sales increased by 3.2% on a constant-currency basis. US adjusted gross profits increased by 12.3% as both pharmacy and retail segments sales grew strongly. US adjusted operating income increased by 46.3%. International sales increased by 34.2%. Within the international region, UK sales were up 13.4%, reflecting ongoing sales recovery in the UK market. Adjusted operating income for the international region was up 89.0% year over year, driven by higher sales and tight cost control. CEO Rosalind Brewer discussed some initiatives taken by the company during the quarter. Brewer said First, we are transforming and aligning the core business and building a pharmacy of the future that will enable and support its health care strategy. Second, we are building a platform of consumer-centric health care solutions, which we expect to fuel our next phase of growth. Third, we are refocusing our portfolio and optimizing capital allocation. Finally, we are building a diverse winning team that will underpin our strategic priorities. During the first quarter, Walgreens administered 15.6 million Covid-19 vaccinations in the US, up from 13.5 million vaccines in 4Q21.
Outlook	The company raised its full-year guidance for adjusted EPS and now expects it to grow by a low-single-digit percentage versus prior guidance of flat growth. Walgreens expects to administer 30 million Covid-19 vaccinations in fiscal 2022, 5 million higher than the previous guidance. In fiscal 2022, US adjusted operating income is expected to be flat to up slightly. International sales projections improved to 9.0%–11.0% growth compared to previous guidance of 8.0%–10.0% and adjusted operating income is expected to grow more than 50.0%.

Home and Home-Improvement Retailers

	Tractor Supply Company (NasdaqGS: TSCO) 4Q21
Commentary	Tractor Supply Company reported a 15.3% year-over-year increase in revenue, or a 51.6% increase on a two-year basis. Adjusted EPS increased by 17.7% year over year or by 59.5% on a two-year basis. Comparable sales increased by 12.7% year over year, driven by a 10.3% increase in average tickets and 2.4% growth in transactions. Gross profit increased 12.6% year over year and gross margin rate declined to 33.8% compared to 34.6% last year, driven by higher product cost inflation and inflated transportation costs. Adjusted operating profits increased by 13.4% year over year. President & CEO Harry Lawton said The strength in our customer base is supporting our market share gains across our categories. Our Neighbor's Club program is growing with membership up 24% year-over-year as we transition from an affinity program to a tier rewards program. We have robust retention rates and engagement, especially with our highest value tier members. The company opened 36 new Tractor Supply stores and one new Petsense store in the fourth quarter.
Outlook	Tractor Supply Company expects fiscal 2022 net sales to be between $13.6 and $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%. The company expects its operating margin to be between 10.1% and 10.3% and EPS between $9.20 and $9.50, representing growth of 6.9%–10.3% compared to fiscal 2021. Tractor Supply anticipates comps to be flat to slightly positive in 1Q22. Fiscal 2022 consists of 53 weeks, one week more than fiscal 2021. The benefit of the 53rd week is anticipated to be worth around 1.5 percentage points of net sales and $0.15 contribution to EPS in fiscal 2022, according to the company’s estimates. In the long term, from fiscal 2022 to fiscal 2026, the company expects net sales growth between 6.0%–7.0% with comp sales growth between 4.0% and 5.0% and operating margin growth between 10.1% and 10.6%. In fiscal 2022, Tractor Supply plans to open around 75–80 new stores, remodel more than 150 stores and transform the side lots in around 100 locations along with opening 10 new Petsense stores.

Looking Forward

Apparel & footwear brand owner Levi’s continues to report robust sales growth. The company expects its net revenue to grow double-digits for fiscal 2022. Gross margin is expected to expand by around 15–30 basis points compared to fiscal 2021. Levi’s has plans to take additional price increases in 2022 and beyond, helping to offset inflationary pressures. Drugstore retailer Walgreens Boots Alliance reported strong sales growth in the first quarter of fiscal 2022 and raised its fiscal 2022 full-year guidance for adjusted EPS to low-single-digit versus prior guidance of flat growth. Walgreens expects to administer 30 million Covid-19 vaccinations this year, 5 million higher than the previous guidance. In the home and home-improvement retail sector, Tractor Supply Company reported another strong quarter with double-digit sales growth. In fiscal 2022, the company expects net sales growth between 6.8% and 8.4% and comp sales growth between 3.0% and 4.5%. The company expects its operating margin to be between 10.1% and 10.3% in fiscal 2022. In the long term, the company expects sales growth of between 6.0% and 7.0%, with comp sales growth of between 4.0% and 5.0%.