(Bloomberg) -- Strong consumer sentiment may have been a silver lining of this earnings season, but executives from the biggest US retailers are adding to unease about the health of the economy and a shift in spending patterns.

While it remains unclear where the US economy is headed amid the Fed’s tightening campaign, for now the retail giants appear certain a rebound in product spending won’t happen any time soon. Home Depot predicted home-improvement demand will moderate, while Walmart issued a cautious outlook and kept its hopes low despite a blowout fourth-quarter report. 

This week, Target’s results will show how the company is balancing the challenge it faces from a reliance on discretionary spending as consumers prioritize paying more for essentials like food. And reports from Kroger, Dollar Tree and Costco later in the week will offer further insight into how expenditures on such essentials will hold up. 

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Highlights to look for this week:

Monday: Zoom Video (ZM US) reports after the closing bell, following a decision to eliminate 15% of its workforce earlier this month in light of slowing growth. Against the backdrop of tough comparison and product transition, the pandemic darling is projected to post its slowest quarterly revenue growth and the biggest adjusted EPS contraction since its IPO in 2019. The Enterprise segment, which Zoom is counting on to offset weakness in online revenue, is also facing longer sales cycle and threats from bigger rivals, according to Bloomberg Intelligence. That said, Zoom has consistently beaten earnings estimates in its past reports, highlighting the potential for positive surprises in the upcoming announcement. 

Tuesday: Norwegian Cruise (NCLH US) is due premarket. Since the cruise company tempered its outlook last month, analysts have projected a steeper adjusted Ebitda loss of $8.6 million for the fourth quarter, marking a return to negative territory for the profitability metric. That said, shares have risen 34% this year through Friday, outpacing the 11% gain seen in the S&P 500 consumer discretionary sector index and underscoring investors’ expectations for a recovery in travel. Analysts including Barclays will watch for bookings updates for the year and commentary on core pricing to weigh the prospects.

  • Target (TGT US) reports before the market open. Having already sounded the alarm in November over weakening sales trends, the retailer that is often seen as a yardstick of consumer behavior could report its first comparable-sales decline in almost six years. Wall Street consensus is projecting a comparable sales decline of 1.35%, while Bank of America analysts see upside to the consensus from continued traffic growth and price hikes in consumables. Still, the shift to less-profitable food and consumables has added pressure to the retailer’s gross margins, prompting BofA to lower its estimate for fiscal 2024 earnings-per-share outlook.
  • Meanwhile, discount grocer Dollar Tree (DLTR US), due before the opening bell on Wednesday, is projected to see same-store sales growth of 5.7%, compared with the 2.5% gains seen in the same period a year ago. Solid consumer demand for food and household essentials alongside a low minimum price point bode well for the deep-discount retailer, Bloomberg Intelligence says.

Wednesday: Salesforce (CRM US) is due after market. Revenue growth in constant currency is expected to slow to the low double-digits in 4Q as it faces lower demand in a tough economic environment. Layoffs in the tech sector — a heavy user of Salesforce products — could also mean a slower outlook for bookings. One bright spot is a strong forecast for margin expansion, due to lower headcount-related expenses and more cost-cutting measures taken amid increased pressure from activists, as noted by analysts from Bloomberg Intelligence and Citi. BI also suggests it’s possible for management to boost buybacks to counter slowing sales, as they expect the company to prioritize profitability over acquisitions. 

Thursday: Macy’s (M US) will report premarket. Analysts will look for more color from the company on its outlook for consumer spending for the rest of the year, as it had guided expectations for 4Q net sales lower on weaker-than-anticipated holiday sales. The department-store operator had also said it expects shoppers to remain pressured in the first half. Efforts to return to growth such as expanding private labels and improving its online strategy may need a few more years to yield results, as BI and Cowen analysts wrote that the pullback in discretionary spending and decline in mall traffic continue to weigh on the industry. 

  • Kroger (KR US) is also due before the bell. Consensus estimates for 4Q and the following quarter suggest a deceleration in same-store sales growth, underscoring concerns around the longevity of the boom in food-at-home demand as inflation continues to take a toll on shoppers. That said, Bloomberg Intelligence noted that strong private label and fresh-foods sales are reinforcing the grocer’s value proposition. “High-margin alternative revenue streams in retail media, personal finance and consumer health could help offset margin contraction” from higher input costs, BI said.

Friday: No major earnings scheduled.

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