This story was updated on Thursday to include earnings results from Abercrombie & Fitch and Foot Locker.
The third-quarter U.S. corporate earnings season is winding down, but this week will see reports from some bellwether companies in the world of consumer spending. Third-quarter performances for these big-scale merchants are expected to be largely mixed, especially for companies in the business of selling things abroad, like Wal-Mart, which is facing headwinds from a strong U.S. dollar.
Department store giant Macy’s kicked off the retail chapter of the season last week with lower-than-expected sales, which helped pull down retail stocks last week. But overall, the consumer discretionary sector -- which includes sporting goods stores, office suppliers and online merchandisers -- has been one of the strongest performers of an earnings season anchored by a global downturn in the energy business, a strong U.S. dollar, and China's slowing economy.
Corporate earnings in consumer discretionary spending has grown by about 16 percent in the third quarter, the highest among the 10 major sectors of corporate America, according to S&P Capital IQ, which tracks earnings of the big U.S. companies. Consumer discretionary spending is on anything that U.S. consumers could cut out of their monthly budget if they had to, from basketball shoes to hunting rifles.
Eric Wiegand, senior portfolio manager at U.S. Bank, says performance among retail vendors has been divided between the big-scale companies and their smaller rivals who are struggling to ramp up their online platforms. “There’s still a need among some retailers to continue to invest and expand their online capabilities. It’s a much more competitive environment right now,” Wiegand said.
Bob Phibbs agrees.
The CEO of The Retail Doctor, a New York-based retail consultancy, says retailers are under pressure to offer better and distinct customer experience, and to develop their online sales and marketing.
But overall, Phibbs said he expected this holiday season to be in line with an improvement in the U.S. economy. “Look at gas. It’s down to $2 per gallon,” Phibbs said. “The thing that would worry me is if we had gas back above $4 a gallon, and the stock market wasn’t doing well, and people were losing jobs.”
Here are some notable retailers reporting their earnings for the third-quarter season. Retailers tend to report July-October performance a month later than most other sectors, because they like to begin or end their fiscal years after the U.S. holidays.
Wal-Mart Stores Inc. (NYSE:WMT) is expected to report higher revenue for the three months ending October, to $117.1 billion from $119.0 billion in the same quarter last year, on Tuesday before markets open. Analysts say the world’s largest retailer based on market value (after Amazon.com) should report $3.13 billion, or 97 cents per share, in net profit, down from $3.71 billion, or $1.15 per share, in the same quarter last year. Wal-Mart shares are trading at around $56 per share and the price has lost 34 percent of its value so far this year.
UPDATE: Wal-Mart Stores said Tuesday morning it beat third quarter profit estimates at 99 cents per share. Revenue for the quarter came in at $117.41 billion. The company raised its annual profit estimate to $4.50 to $4.65 per share, up from a previous forecast of $4.40. Wal-Mart said earlier this year that its earnings would decrease by as much as 12 percent next year on higher payroll costs and a strong U.S. dollar. Wal-Mart shares were up 2.44 percent to $59.30 on Tuesday morning.
UPDATE: Dicks Sporting Goods reported diluted earnings per share of 41 cents, and $1.64 billion in revenue, in line with estimates. Net income was lower than expected, however, at $47.2 million. The company slashed its profit forecast for the year on declines from its Golf Galaxy stores. Dicks Sporting Goods shares dropped nearly 17 percent to $33.97 Tuesday morning.
Home Depot Inc. (NYSE:HD) will report its third-quarter earnings Tuesday morning before the opening bell. The Atlanta-based home-improvement retailer is expected to report higher revenue of $21.54 billion in the three months ending October compared to $20.52 billion in the same period last year. Net profit is forecast to rise to $1.67 billion, to $1.31 per share, from $1.54 billion, or $1.15 per share. Home Depot stock is trading at around $120 and is up about 14 percent for the year.
UPDATE: Home Depot said Tuesday morning reported adjusted earnings per share of $1.36 and $21.82 billion in the quarter, topping analysts’ expectations. Shares in the largest vendor for disceretionary home-imporvement goods jumped 2.42 percent to $123.93 Tuesday morning.
TJX Companies Inc. (NYSE:TJX) is expected to report before markets open on Tuesday higher revenue for its three months ending October, to $7.73 billion from $7.37 billion. The Massachusetts-based owner of the T.J. Maxx off-price apparel chain is forecast to report lower net income of $580.1 million, or 85 cents per share, from $594.0 million, or 84 cents per share, in the same quarter last year. TJX stock is trading at around $64 per share and the price is down about 7 percent for the year.
UPDATE: TJX Companies reported Tuesday morning adjusted earnings of 86 cents per share on revenue of $7.75 billion, beating analysts’ forecasts. TJX shares jumped 4.18 percent to $68.30 on Tuesday morning.
Target Corporation (NYSE:TGT) will report its earnings for the three months ending October on Wednesday before markets open. The second-largest brick-and-mortar retailer in the U.S. is expected to report $17.60 billion in revenue for the quarter, from $17.73 billion in the same period last year. Net oncome is seen growing to $545.2 million, or 86 cents per share, from $352.0 million, or 55 cents per share. Target stock is trading at around $71 per share and has lost about 6.5 percent of its value since the start of the year.
UPDATE: Target reported Wednesday morning adjusted earnings of 86 cents per share, matching analysts’ forecasts, on revenue of $17.61 billion, which beat expectations. Same-store sales increased 1.9 percent compared to the year-ago quarter. Target shares dropped 2 percent to $71.46 in premarket trading on Wednesday.
Staples Inc. (NASDAQ:SPLS) is expected to show lower sales when it posts its third-quarter earnings on Wednesday before markets open, to $5.67 billion from $5.96 billion. Net income is forecast to increase to $230.6 million, or 36 cents per share, from $216.8 million, or 34 cents per share. Shares in the Massachusetts-based office-supply chain is trading at around $13 per share, which is down about 31 percent for the year.
UPDATE: Staples reported Wednesday morning better-than-expected third quarter revenue of $5.59 billion, and net income came in at 31 cents per share. The office supplier beat analysts estimated on adjusted earnings but missed on revenue.
L Brands Inc. (NYSE:LB) will report earnings Wednesday after the closing bell in New York. The owner of Victoria’s Secret and Bath & Body Works is forecast to report higher revenue, to $2.49 billion from $2.32 billion, for the three months ending October. The Ohio-based company will report net profit of $149.2 million, or 51 cents per share, up from $131.8 million, or 44 cents per share. L Brands is trading at around $90 per share and its stock has gained more than 4 percent for the year.
UPDATE: L Brands said Wednesday after markets closed that its comparable stores sales (a key retail metric that excludes recently opened outlets) rose by 7 percent in the three months ending October compared to the same period last year. Third quarter earnings were 55 cents per share on $2.48 billion in revenue, handily beating estimates on both measures.
Best Buy Co. Inc. (NYSE:BBY) will report earnings for the three months ending October before markets open Thursday. The world’s largest brick-and-mortar electronics retailer is forecast to report an earnings drop, to $8.86 billion from $9.38 billion. Net profit is expected to increase to $118.0 million, or 34 cents per share, from $107.0 million, or 30 cents per share. Shares in the Minnesota-based company are trading at around $32 and they have lost about 19 percent of their value so far in 2015.
UPDATE: Best Buy reported Thursday morning lower-than-expected same-store sales (a key retail metric that excludes newer stores) in the quarter ended October. The electronics-focused retailer said it earned $8.82 billion in the quarter, down 2.3 percent from the same period last year, on lower revenue from repair services and mobile phone sales. The company beat analysts’ profit expectations, earning $125 million in the quarter, or 36 cents per share. Excusing items, net income was $144 million, or 41 cents per share. Best Buy’s shares plummeted more than 6 percent on Thursday morning, to $29.49 as traders focused on the revenue drop. On the bright side: Web-based sales increased 18 percent.
Ross Stores Inc. (NASDAQ:ROST) will report its quarterly results Thursday after markets close. The off-price retailer of name brand apparel and accessories is expected to grow year-over-year third-quarter revenue to $2.77 billion from $2.60 billion. Net profit is seen rising to $202.7 million, or 50 cents per share, from $192.7 million, or 47 cents per share. Ross stock is trading at around $46 per share, which is down more than 3 percent for the year.
UPDATE: Ross Stores reported net income of $215.7 million, or 53 cents per share, on revenue of $2.78 billion, beating Wall Street estimates. The off-price retailer said it maintained its forecast of zero to 1 percent store sales growth in the last three months of the year compared to last year. But the better-than-expected third quarter boosted the company’s stock by more than 8 percent to $46.20 in after-the-bell trading.
Gap Inc. (NYSE:GPS) will report its third-quarter earnings on Thursday after markets close. The San Francisco-based owner of Old Navy, The Gap and Banana Republic retail apparel chains is expected to report lower revenue, to $3.90 billion from $3.97 billion. Net income is also expected to drop to $283.4 million, or 68 cents per share, from $351.0 million, or 80 cents per share. The company’s stock is trading at around $25 per share and has lost about 40 percent if its value this year.
UPDATE: Gap Inc. reported net profit of $248.0 million, or 61 cents per share, on revenue of $3.86 billion. The lower-than-expected results drove the stock down 1.24 percent to $25.08 after the bell on Thursday.
Abercrombie & Fitch Co. (NYSE:ANF) will post its third-quarter earnings results Friday before the opening bell. The Ohio-based apparel retailer is expected to show lower revenue, to $864.5 million from $911.5 million. Net profit is also expected to shrink to $16.9 million, or 23 cents per share, from $18.2 million, or 25 cents per share. The company’s stock is trading at around $19 per share and it’s lost about a third of its value since the beginning of the year.
Foot Locker Inc. (NYSE:FL) will post its third-quarter results Friday before markets open in New York. The New York-based shoe and athletic wear retailer is expected to report higher revenue, to $1.78 billion from $1.73 billion, in its three months ending October. Net profit is also forecast to grow, to $132.9 million, or 95 cents per share, from $120.0 million, or 82 cents per share.