Retail Earnings Preview: What To Watch For

By: Spencer Israel

Retail stocks will take center stage this week, with Walmart, Target, Home Depot, and Lowe’s among the highlights.

All of these reports will come amidst an environment of rising retail sales in the U.S. (though recently imposed stay-at-home restrictions in several states could throw a wrench in that trend).

In September, U.S. retail sales rose 1.9% month-over-month, the fifth consecutive month of gains following the historic dropoff in spending in March and April and the biggest increase since June. The rise was led by more spending at clothing stores (11%) department stores (9.7%) and sporting goods stores (5.7%).

October’s retail sales report is due Tuesday at 8:30 ET, with economists predicting a 0.5% monthly increase. Tuesday’s report should be buoyed by Amazon Prime Day in October. The company said the two-day event took in $10.4 billion, up 45.2% year-over-year.

As far as what to watch for, most of the companies reporting this week exceed analyst estimates more often than not. But pay close attention to which companies report the strongest e-commerce growth and overall top-line revenue growth. For those that don’t, will they cite a lack of a second round of stimulus as a reason?

And though retailers have been hesitant to make projections this year, any forward-looking guidance will be closely scrutinized, especially as we head into the all-important holiday season.

All eyes will also be on Walmart and its new membership program, Walmart+, which launched on Sept. 15. Expect the market to pay close attention to how many people have signed up. Analysts at BMO Equity Research predict the service may have as many as 19 million members.

Below is the schedule for the biggest retail earnings this week, with each stock’s implied weekly move in either direction based on current options pricing.

Tuesday Pre-Market:
Walmart (4.46%)
Home Depot (3.74%)
Kohl’s (12.70%)

Wednesday Pre-Market:
Target (6.31%)
Lowe’s (5.92%)
TJX Companies (6.05%)
Wednesday After Market Close:
L Brands (10.95%)

Thursday Pre-Market:
BJ’s Wholesale (8.86%)
Macy’s (14%)

Thursday After Market Close:
Ross Stores (5.63%)

Friday Pre-Market:
Foot Locker (10.12%)
Hibbett Sports (18.08%)

The author is long the S&P 500 in his retirement account.

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