Cowen dove into the impact of weakening discretionary spending trends for the consumer sector ahead of the Q3 earnings season.
Analyst John Kernan and team noted that inventory across the industry is at peak levels and rising transactional foreign currency risk suggest gross margin estimates are too high in the sector. of note, surveys conducted by the firm also indicate consumers anticipated spending less in certain categories like apparel, which could pressure the top line as well.
Cowen pointed out that consensus estimates assume margin expansion for ~95% of its coverage in FY23, but guidance cuts are more likely to be seen alongside the Q3 earnings reports due to the current backdrop.
In particular, guidance cuts are anticipated by Cowen for Under Armour ( UAA ), Burlington Stores ( BURL ), Allbirds ( BIRD ), Hanesbrands ( HBI ), PVH ( PVH ), Skechers ( SKX ), Puma ( OTCPK:PMMAF ), Adidas ( OTCQX:ADDYY ), and FIGS ( FIGS ).
On the flip side, Cowen has the highest conviction in Lululemon ( LULU ), TJX Companies ( TJX ), Deckers Outdoor ( DECK ), and Dick's Sporting Goods ( NYSE: DKS ) to hold their guidance steady.
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