Thursday Morning Rebel Brief: Initial Jobless Claims and Retail Earnings

Yesterday’s market carnage (sparked by Target’s lackluster EPS) sent many stocks into a tailspin, with no sector getting hit harder than retail. Names like Dollar Tree ($DLTR), Costco ($COST), Dollar General ($DG) and others finished the day down double digits. 

That damage looks like it’ll extend into todays session, with all three indices trading in the red by more than a percent in premarket. Let’s dive into what’s driving the action.

Source: CNBC Fear & Greed Index

U.S. Initial Jobless Claims Higher Than Expected

The “Initial Jobless Claims” measure how many Americans filed for unemployment for the first time during the past week. The forecast for todays report was 200K initial jobless claims. The report was 218K — a negative surprise. This number is 21K higher than last week’s report, 197K. Notably, profit margin reductions (like the ones we’ve been seeing lately) are known to correlate with increased layoffs.

Kohl’s ($KSS) Misses Earnings in a Big Way

Kohl’s missed EPS by -85.3% ($0.11 vs $0.75 expected) and beat on revenue by 0.7% ($3.72B vs $3.69B expected). The stock traded down as much as 8.86% in the premarket this morning, but has pared back some of the losses, currently down around 4%.

Kohl’s also cut it’s full-year earnings forecast, and warned investors of a “considerable slowdown” in April. The miss, like Target’s, was due in large part to rising costs and inflationary pressures cutting into profit margins.

Bath and Body Works ($BBWI) Follows the Bearish Retail Trend, Cuts Guidance

Bath and Body Works beat EPS by 20.8% ($0.64 vs $0.53 expected) and beat on revenue by 0.7% ($145B vs $144B expected). The stock is trading down 8.59% in the premarket.

Despite beating on both the top and bottom line, $BBWI was a victim of the same sell off that plagued the rest of retail, driven by inflationary pressures cutting into profit margins. As a result the retailer cut its profit outlook for the year, which is likely what is sending the stock lower.

Cisco ($CSCO) Sinks on Revenue Miss

Cisco beat EPS by 0.93% ($0.87 vs $0.86 expected) but missed on revenue by -3.77% ($12.84B vs $13.34B expected). The stock is down more than 10% in the premarket. 

While many retailers have beat revenue expectations but missed on profit margins, Cisco’s story was the opposite. The CEO cut its 2022 revenue guidance on fears that China’s lockdowns and the war in Europe could reduce demand for their products.

BJ’s Wholesale ($BJ) Bucks the Trend, Proves It’s Not All Bad in Retail

BJ’s posted a robust earnings, beating EPS by 21.17% ($0.87 vs $0.72 expected) and beating on revenue by 6.09% ($4.50B vs $4.24B expected). The stock is trading higher by roughly 6% in the premarket.

BJ’s Wholesale offered a glimmer of hope for bulls with it’s upbeat earnings surprise. On top of a big beat on profit, the wholesaler reported better-than-expected same-store sales and double digit EPS and revenue growth (20.8% and 16.2% respectively).