The final leg of earnings season kicks off this week with notable earnings announcements from Wal-Mart Stores Inc., the world’s largest retailer, Target Corporation, the second-largest U.S. discount retailer, and Home Depot Inc., the world's No. 1 home-improvement retailer.
Heading into Monday, S&P 500 companies are now on track to deliver earnings growth of 0.4 percent for the first quarter, compared with projections for a 5.8 percent decline, according to Bloomberg data. Out of 460 S&P 500 companies that have reported earnings thus far, 72 percent have beaten earnings estimates, while 47 percent have beat revenue forecasts.
A steep drop in gasoline prices across the U.S. was expected to boost sales at retailers, especially those that cater to middle- to low-income consumers, but Americans have remained cautious on spending.
“In a testament to tight household budgets, more Americans spent the savings from lower gasoline prices on necessities than anything else,” Greg McBride, Bankrate.com’s chief financial analyst, said in a statement Monday.
Four in 10 Americans spent savings from lower gasoline prices on groceries or rent, according to Bankrate.com.
The percentage of Americans using gas savings for everyday necessities outpaced those using it for discretionary purchases by nearly 3-to-1, Bankrate said.
Here’s a deeper look into the retail companies reporting earnings this week:
Wal-Mart Stores, Inc. (NYSE:WMT) will report first-quarter earnings Tuesday, offering investors a sense of the overall health of the U.S. retail sector. The world’s largest retailer aims to roll out two services this year, including Alipay in China, plus a free shipping service to rival Amazon Prime.
Wall Street expects Wal-Mart to report first-quarter net income of $3.38 billion, or $1.05 per share, on revenue of $116.3 billion, according to analysts polled by Thomson Reuters. That compares with a profit of $3.59 billion, or $1.11 per share, on sales of $114.96 billion during the same period a year ago.
Shares of Wal-Mart have shed 8 percent this year.
Home Depot Inc. (NYSE:HD) will also release earnings Tuesday after reporting a 36 percent jump in fourth-quarter profit, driven by Americans spending more on home renovations.
Wall Street forecasts Home Depot to report first-quarter net income of $1.49 million, or $1.15 per share, on revenue of $20.82 billion, compared with a profit of $1.38 million, or $1 per share, on sales of $19.69 billion during the same period a year ago.
Shares of Home Depot have gained 8 percent in 2015.
Target Corporation (NYSE:TGT), which will release first-quarter earnings Wednesday, posted a jump in same-store sales and profits in the fourth quarter, helped by its online business. Following the company’s massive data breach at its stores during the 2013 holiday season, Target took steps to boost holiday sales with free shipping on online orders.
CEO Brian Cornell announced in January that the company plans to close 133 Canadian stores and is laying off more than 17,000 employees after the two-year Canadian venture was unprofitable.
Target is forecast to turn in first-quarter net income of $642.1 million, or $1.01 per share, on revenue of $17.09 billion, compared with a profit of $418 million, or 66 cents per share, on sales of $17.05 billion during the same period a year ago.
Shares of Target have added 3 percent in 2015.
Strength in home improvements will also be tested Wednesday when Lowe's Companies Inc. (NYSE:LOW), the world’s No. 2 home improvement retailer, posts first quarter results. Lowe’s same-store sales, a key retail metric, jumped 7.4 percent in the fourth-quarter, well above Wall Street estimates for 5.1 percent, according to research firm Consensus Metrix.
Lowe’s is estimated to report first-quarter net income of $709.82 million, or 74 cents per share, on revenue of $14.27 billion, compared with a profit of $624 million, or 61 cents per share, on sales of $13.4 billion during the same period a year ago.
Shares of Lowe’s have climbed 6 percent this year.
Consumer electronics giant Best Buy Co. Inc. (NYSE:BBY), which will post earnings Thursday, announced in March it plans to close 66 stores and consolidate operations in Canada, the retailer's second-largest market. The move will cut 500 full-time and 1,000 part-time jobs.
The decision will also hurt Best Buy’s earnings this year, as it will cost the company about $200 million to $280 million in restructuring charges, Best Buy said.
Economists expect Best Buy to report first-quarter net income of $73.29 million, or 18 cents per share, on revenue of $8.47 billion, compared with a profit of $461 million, or $1.31 per share, on sales of $9.04 billion during the same period a year ago.
Shares of Best Buy have lost 11 percent this year.