(Bloomberg) -- Walmart and Home Depot are among major US retailers reporting earnings this week that will provide insight into one of investors’ biggest concerns: the resilience of the consumer in the face of economic softening.
The retailers are expected to post quarterly results at least in line with estimates, and in some cases could even have modest upgrades to their full-year guidance. Yet, as demonstrated by PayPal and Under Armour’s post-earnings share slumps last week, investors will be sensitive to forecast revisions that cast doubt on companies’ ability to navigate faltering consumer confidence.
Data on retail sales and manufacturing inventories will also provide a read into whether the US economy can avoid sliding into recession later this year.
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Highlights to look for this week:
Monday: No major earnings expected.
Tuesday: Home Depot (HD US) has already warned of a fiscal-year profit decline, so there is little room for further disappointment in the first-quarter earnings due before market open. Unfavorable weather dented seasonal-goods revenue while spending data showed weaker trends at home-improvement retailers, Citi says. Investors will watch for management comments on whether there’s been any improvement in same-store sales this month, following a steeper quarterly decline of 1.3% projected by Bloomberg consensus.
Wednesday: Target’s (TGT US) margins will be in focus when it reports pre-market, as the retailer is still grappling with a shift in spending patterns at its stores. Although customers are making frequent purchases, spending is focused on lower-margin categories such as food and household products rather than discretionary items like apparel, Bloomberg Intelligence notes. Jefferies analysts, whose EPS estimates are above consensus, are optimistic that the company will overcome gross margin pressure in the second half.
- TJX Cos. (TJX US), the operator of T.J. Maxx and Marshalls stores, is due to report before the open. The discount retailer of apparel and home goods could raise full-year EPS guidance on possible quarterly sales and EPS beats, Citi analysts say, citing an uptick in first-quarter store traffic data provided by Placer Labs.
Thursday: Strong food sales and increased membership at its Sam’s Club division will contribute to a likely first-quarter sales beat when Walmart (WMT US) reports before the bell, Bloomberg Intelligence says. The company has room for a slight raise in annual guidance, according to Citi analysts. Thanks to market-share gains and improving profitability, the Street has been bullish on Walmart’s long-term prospects. The retailer has 37 “buy” and 11 “hold” ratings on its shares after it touted investments in automation and advertising during its analyst event in April.
- Ross Stores (ROST US) earnings will reveal if the off-price retailer defied declining foot traffic at a time when lower-income consumers are pulling back on discretionary spending. Citi expects a slight profit beat in the first-quarter report due after the close, bolstering consensus estimates of a full-year profit above the company’s own guidance. UBS strikes a cautionary note, saying sales could have slowed at the end of the quarter, potentially jeopardizing positive surprises.
Friday: While Deere (DE US) continues to benefit from strong machinery demand from cash-rich farmers, order trends and margin sustainability will be scrutinized, Bloomberg Intelligence says. Second-quarter revenue and profit growth are expected to have accelerated compared to the same period a year ago. The farm-equipment maker is due to announce before the opening bell.
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