Morgan Stanley Sees Q2 Earnings In Department Store Names 'Likely Uneventful'

In a report published Thursday, Morgan Stanley analyst Kimberly Greenberger previewed the Specialty Retail & Department stores ahead of the group's second quarter results which will "likely" be "uneventful." According to Greenberger, trends in the second quarter likely improved from the first quarter as weather headwinds and port strike challenges eased. However, the group's valuation remain "elevated" with "diminishing" tailwinds moving into the fourth quarter. Macy's, Inc. M will kick off the group's earnings season on Wednesday. According to Greenberger, the company's fundamentals will likely take a "back seat" to activists pushing the company to monetize its real estate assets. The analyst is projecting comps of 0.3 percent, gross margin of 41.1 percent, SG&A 32.7 percent of sales. Kohl's Corporation KSS will report its second quarter results on Thursday. The analyst "would not be surprised" if Kohl's can meet Street comp estimates of 1.8 percent. The company is also expected to report flat gross margins of 39.0 percent and SG&A 23.5 percent of sales. Finally, longer term margin and free cash flow pressure remains but "should be less evident" this quarter. Nordstrom, Inc. JWN is also scheduled to report its second quarter results on Thursday. The analyst is projecting the company to report the best comp sales growth in the sector of 3.5 percent, although continued investment pressures "linger" and will result in a 140 basis point dip in operating margins to 8.4 percent. Finally, J C Penney Company Inc JCP will report its second quarter results on Friday. According to Greenberger, the company's second quarter comps likely improved "slightly" from the first quarter's 3.4 percent but gross margin tailwinds are diminishing. In addition, the analyst's proprietary apparel discounting index noted "heightened" discounting activity which puts into question J.C. Penney's ability to deliver both an improved sales and gross margin.