LIVE MARKETS-The half-up, half-down world of retail and restaurants

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

THE HALF-UP, HALF-DOWN WORLD OF RETAIL AND RESTAURANTS

With trade policy concerns at heightened levels, LSEG's view of the U.S. retail sector is showing some dramatic contrasts so far in the second-quarter earnings season.

Overall the U.S. retail and restaurant sector is showing earnings growth of 5.7% year-over-year but under the hood, half of its ten consumer groups are in decline.

At the time they wrote the report, 89 of the 197 companies in LSEG's Retail/Restaurant Index had reported EPS results for Q2 2025, representing 45% of the index.

At the top of the scale, the broadline retail segment has been doing the best with a 30.8% growth rate. However, this outperformance leans very heavily on Amazon.com AMZN.O and its growth rate of 33.3%. And of the six companies in the group only three are on track to post positive estimated earnings growth for Q2, while Etsy ETSY.O, Kohl’s KSS.N and Macy’s M.N have the weakest estimated earnings growth rates.

Broadline retail is followed by a growth rate of 14.4% for hotels, restaurants & leisure. But on the other end of the spectrum, textiles, apparel & luxury goods are the weakest groups with a 41.4% drop so far in this earnings season.

Of the companies that have reported "many have pointed to higher prices, challenging macroeconomic conditions and a cautious consumer as key headwinds," according to LSEG.

And about 78% cited the impact of tariffs as a "significant factor this quarter," they said.

One way that retailers are trying to manage the tariff situation is by reducing exposure to countries whose goods are hit with hefty U.S. import tariffs. As an example, they cite Target TGT.N saying on its Q1 conference call that it had reduced its goods from China to 30% from 60% in 2017. And they said at the time that they were aiming to be below 25% by the end of next year. The retailer isn't due to report its Q2 results until August 20.

In investor calls, executives from Procter & Gamble PG.N, Coca-Cola KO.N and Chipotle Mexican Grill CMG.N have said that lower-income U.S. households are cutting back on eating out, travel and pantry staples like diapers, soda and beer, as U.S. tariffs on imports are set to push prices even higher.

And, caught between rising costs from tariffs and belt-tightening consumers, big retailers are clashing with the producers of consumer brands such as Nivea-maker Beiersdorf BEIG.DE and brewer Heineken HEIN.AS as they look to avoid sticker shock that could hurt sales.

Here is the topsy-turvy picture of Q2 so far as per LSEG:

(Sinéad Carew)

*****

EARLIER ON LIVE MARKETS:

STEP CAUTIOUSLY GIVEN THE FOGGY ECONOMIC PATH AHEAD CLICK HERE

WALL STREET INDEXES RISE WITH A SWIRL OF DATA, EARNINGS, TARIFF NEWS CLICK HERE

DOW INDUSTRIALS: SETTING UP FOR ANOTHER RUN AT THE WALL? CLICK HERE

"EARNINGS RULE": WHY MARKETS ARE BRUSHING OFF TRADE TENSIONS CLICK HERE

INSURERS AT NEW PEAK, RUSSIAN PLAYS UP, DEFENCE DOWN CLICK HERE

BEFORE THE BELL: TARIFFS, CHIPS AND EARNINGS CLICK HERE

SPLIT BANK OF ENGLAND SET TO CUT RATES CLICK HERE