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Retail Holiday Season Results on Deck: What to Watch Out For

Tirthankar Chakraborty
·5 min read

A slew of retail fourth-quarter releases are scheduled this week. The results are most likely to reflect the almost 50-year low unemployment level, faster growth in wages than inflation and confident consumers.

Total earnings for retailers that have reported earnings so far are up 0.4% from the same period last year on 9.4% higher revenues (read more: Spotlight on Retail Sector Earnings).

But what explains Walmart Inc.’s WMT miss in fourth-quarter earnings and issuance of discouraging guidance? Let’s admit, the company’s results were primarily impacted by the unrest in Chile which won’t last long.

And now that a host of top retailers are gearing up to report, let us take a look at how they are poised. The Home Depot, Inc. HD, Macy's, Inc. M, The TJX Companies, Inc. TJX and Best Buy Co., Inc. BBY are slated to report this week.

Home Depot

The home improvement retailer’s management missed growth targets in the last two quarters. So what can we expect from its fourth-quarter earnings results scheduled on Feb 25, before market opens?

Firstly, CEO Craig Menear said that the dismal two-quarter performance was due to temporary issues like a drop in lumber prices and not particularly because of any persisting trend. And now management expects the company’s comparable-store sales to show an improvement of roughly 3.5% for the full year. But that falls below management’s initial target of 5%.

Moreover, consumer outlays slowed down over the holiday shopping season. Analysts thus expect revenues for the quarter of $27.75 billion, suggesting a drop from $26.49 billion reported a year ago. Profit margin isn’t expected to be promising in the fourth quarter as well. Majority of investors expect the company to report earnings of $2.10 a share, compared with $2.25 a year ago.

Macy's

The omni-channel retail organization reported decent holiday sales last year. Management believes that a strong digital business and terrific Growth150 store performance drove sales. But does that mean the company will report upbeat fourth-quarter earnings results on Feb 25, before the opening bell?

Unfortunately, the company has spent extensively to introduce a loyalty program at its stores in the quarter. The introduction of technologies to bolster its merchandising strategies improved its websites and upgraded its supply chain. But the uptick in costs will certainly dent profit margins. The company is thus expected to report earnings of $1.95 per share, suggesting a drop from $2.73 a year ago.

Revenues are also expected to decline year over year, thanks to increased expenses. But it’s worth pointing out that these expenses will eventually improve margins.

The TJX Companies

The apparel and home fashion retailer is slated to release fourth-quarter fiscal 2020 results on Feb 26, before the opening bell. Lest we forget, the retail giant had entered the fourth quarter on a positive note, with sales surpassing expectations in the third quarter by 4%. The company’s T.J. Maxx and Marshalls stores were primarily responsible for boosting the sales figures.

The stores are expected to have contributed in the fourth quarter as well. In fact, TJX Companies’ executives now expect comparable-sales to rise 3% in 2019. Overall revenues are expected to come in at $11.85 billion, indicating a rise from the year-ago $11.13 billion. Earnings per share are estimated at 77 cents, suggesting an improvement from 59 cents a year ago. What’s more, such financial success should help the company hike dividends in 2020, leaving it just one annual dividend hike away from qualifying as a dividend aristocrat.

Best Buy

The retailer of technology products is scheduled to report fiscal fourth-quarter results early Thursday. Best Buy is surely well-positioned to benefit from growth in electronic sales. The boom in wireless headphones and televisions during the holiday period also bode well for Best Buy.

The company’s absence in China is also a boon, given the coronavirus outbreak. In fact, a couple of years back, the company made a strategic move to sell all of its 184 stores in the country to focus more on its North American business.

Best Buy is expected to report earnings per share of $2.76 in the fourth quarter, suggesting a rise from $2.72 reported a year ago. Revenues are expected at $15.09 billion compared with $14.80 billion a year ago.

While Home Depot has a Zacks Rank #3 (Hold), Macy's, The TJX Companies and Best Buy have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Click to get this free report The Home Depot, Inc. (HD) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report Best Buy Co., Inc. (BBY) : Free Stock Analysis Report The TJX Companies, Inc. (TJX) : Free Stock Analysis Report Macy's, Inc. (M) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research