(Bloomberg) -- US retailers’ better-than-feared earnings earlier this week are boosting sentiment just before Black Friday and Cyber Monday shopping sprees kick in. Best Buy’s outlook boost and Abercrombie’s beat sparked a Tuesday rally in their shares. Nevertheless, profit-eroding markdowns at department stores including Nordstrom have cast doubts on whether holiday sales could still hold up this time around, as consumers trade down on discretionary goods. Decades-high cost of living and macro uncertainty could be more than enough to weigh down the upcoming shopping frenzy, as a Goldman Sachs survey of 1,000 US consumers showed nearly half are planning on spending less during this festive season.
Next week, investors will see how well grocery giant Kroger has taken advantage of shoppers’ pullback from nonessentials, and whether Chinese group-buying site Pinduoduo could benefit from a similar shift in a country that is still heavily impacted by Covid lockdowns.
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Earnings highlights to look for next week:
Monday: Pinduoduo (PDD US) reports before the opening bell. The Chinese e-commerce firm, famous for its group-buying discounts, is projected to post top-line expansion of 43.7%, slightly above the double-digit growth momentum seen in the last report, according to Bloomberg consensus. Revenue gains could have surpassed additional marketing expenditure, Bloomberg Intelligence said, as the Shanghai-based company attracted more mainland Chinese shoppers with its expanded grocery offerings during the country’s continued Covid lockdowns. Meanwhile, Citi analysts expect Pinduoduo to benefit from consumption trade-down and even see a potential beat in profit, in spite of overall macro weakness and seasonal slowness during the quarter.
Tuesday: Bilibili (BILI US) is due premarket. The popular Chinese live-streaming and broadcasting platform, which has yet to turn a profit, is poised to see its losses narrow due to cost controls in research and a potential rebound in advertising growth driven by looser pandemic mobility curbs in the third-quarter reporting period, according to Bloomberg Intelligence. However, sales growth likely remained muted, BI also said, due to soft consumer spending in the country - a macro weakness that Bilibili and its Internet peers have experienced over the past two years. Bilibili’s shares have been sensitive to recent China news including the Biden-Xi meeting and a fresh Covid outbreak, and took a beating after its removal from Hong Kong’s Hang Seng China Enterprises Index and Citi’s rating downgrade. These factors have all contributed to the company’s about 72% year-to-date decline, compared to an about 36% fall in the NASDAQ Golden Dragon China Index.
Wednesday: Salesforce (CRM US) is due after the close. The third-quarter report, which comes on the heels of layoffs and a stake taken by activist investor Starboard, will test the company’s earnings resilience within a sector overshadowed by a strong US dollar and tightened customer software budgets. Revenue is projected to grow at the slowest pace in at least 17 years, while gains excluding currency impact could be at the lowest level in at least 12 years. Citi also pointed out that guidance for current remaining performance obligations, an indicator of near-term demand, may be “underwhelming” with limited room for a positive surprise. Investors tuning into the earnings call will expect an outlook for the next year, said Guggenheim analysts, who are seeing “significant risk” in the company’s ability to meet Wall Street consensus for fiscal 2024.
- ESG in Focus: PVH (PVH US), also due postmarket, aims to have three of its most commonly purchased apparel products be “completely circular” - including the traceability of key raw materials - by 2025. The market may be interested in an update on that goal, as it is the sole item labeled as “under revision” in the company’s progress report. The revision status is thanks to PVH’s partnership with the Ellen MacArthur Foundation to “adjust [its] strategy for greater impact,” per the company’s 2021 corporate responsibility report. The introduction of extended producer responsibility, a key concept in proposals by the European Commission and the state of New York, could raise costs or require adjustments to business models, Bloomberg Intelligence Senior ESG Analyst Gail Glazerman said. This goal has also been set despite the fact that large-scale recycling of used textiles into new clothing does not yet exist.
Thursday: Kroger (KR US) is due before the open. Consensus estimates suggest a sixth consecutive quarter of revenue growth from its core grocery business, thanks to strong food-at-home demand, according to Bloomberg Intelligence. However, gross margin is likely to remain under pressure through the second half due to higher product, labor and transportation costs. Its pending merger with Albertsons has been in focus recently due to legal challenges surrounding Albertsons’ intent to pay a $4 billion special dividend.
Friday: No major earnings scheduled.
--With assistance from Redd Brown and Gabriel Sanchez.
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