Big box retailers and department stores take center stage and report earnings next week. The biggest retailers in the world are lined up to issue their results for the first quarter (Q1) of this year. Could the results sway jittery markets? Strong earnings from major companies have not managed to pull stock markets out of the steep selloff they have experienced since the start of April.
Data from FactSet shows that with 87% of S&P 500 companies having reported Q1 results, 79% have issued better-than-expected earnings per share and 74% announced a beat on their revenues. Yet, that has done nothing to reverse the downward spiral in markets, with the S&P 500 Index having fallen 14% since Apr. 1 and nearing the 20% decline that defines a bear market. Still, investors can expect that analysts on Wall Street and beyond will be paying close attention when the following companies report earnings over the next week.
Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
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The week kicks off with a print from Walmart (NYSE:WMT). The world’s largest retailer has seen its stock hold up reasonably well amid the broader market downturn. Year-to-date (YTD), WMT stock is actually up 1.7% at $147.28 a share compared to a 19% decline for the benchmark S&P 500 index. The fact that Walmart sells essential consumer products and has pricing power, or the ability to raise prices without losing customers, helps to account for the rise in its share price.
While Walmart has been outpacing technology stocks by a wide margin, the company has not been shy about turning to tech companies to fill the ranks of its senior management team. The Bentonville, Arkansas-based company recently announced that it hired former PayPal (NASDAQ:PYPL) executive John Rainey to be its new chief financial officer. For Q1, Wall Street is expecting Walmart to report earnings per share (EPS) of $1.47 on revenue of $138.82 billion.
Home Depot (HD)
the outside of a home depot store
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Demand for housing remains strong despite interest rates marching higher. And that could be good news for Home Depot (NYSE:HD), the largest home improvement retailer whose business has been going gangbusters over the past two years as homeowners upgraded their domiciles while sheltering from the pandemic. Can the momentum continue? We’ll get an idea when Home Depot reports Q1 results on May 17. Analysts forecast that Home Depot will report EPS of $3.67 on revenues of $36.58 billion.
Unfortunately, HD stock has not held up as well as Walmart’s share price amid the current market volatility. YTD, Home Depot’s shares have fallen almost 30% to now trade at $293. That decline has accelerated as inflation runs at 40-year highs, interest rates start to climb, and concerns grow that the U.S. Federal Reserve may push the American economy into a recession to get consumer prices back under control. In such a climate, major home renovations and DIY projects could get pushed to the backburner, hurting Home Depot’s sales.
Stocks Reporting Earnings: Lowe’s (LOW)
the front of a Lowe's store
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We’ll also hear from the other major home improvement retailer in the U.S. next week, Lowe’s (NYSE:LOW). The Mooresville, North Carolina-headquartered company that competes head-to-head against Home Depot in most markets is expected to announce Q1 EPS of $3.23 on revenues of $23.73 billion. Any beat on the earnings could help LOW stock, which has fared only slightly better than Home Depot this year. Since January, Lowe’s share price has fallen 25% to $193.57 per share.
Lowe’s thrived during the pandemic, posting record profits and margins in 2021. However, the company has been telegraphing a sharp slowdown for this year, telling analysts that it expects revenue for all of 2022 in a range of $97 billion to $99 billion. The company has also forecast comparable same-store sales this year to register either a 1% loss or a 1% gain. Either result would be a huge pullback from 24% annualized growth last year.
Target (TGT)
Image of the Target (TGT) logo on a storefront.
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Target (NYSE:TGT) was another retail darling during the pandemic. The Minneapolis-based company won praise for the way in which it ramped up its online shopping and e-commerce business as its nearly 2,000 retail outlets were shuttered due to Covid-19. TGT stock thrived during the pandemic too, more than doubling in about 18 months. However, so far this year, Target’s share price has slumped 5.4% to now change hands at $218.71.
With a price-to-earnings (PE) ratio of 15.52, the stock is inline with the historic PE average of companies listed on the S&P 500 index. Additionally, Target recently upped its quarterly dividend payment to 90 cents a share, another reason to like the retailer and its stock. For Q1, Wall Street is looking for Target to report EPS of $3.05 on revenues of $24.42 billion.
Stocks Reporting Earnings: Kohl’s (KSS)
Image of Kohl's (KSS) logo on a Kohl's store
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Department store chain Kohl’s (NYSE:KSS) enters this earnings season having recently come through a bruising battle with an activist shareholder. Activist investment firm Macellum Advisors tried to replace Kohl’s board of directors with their own nominees in an ugly proxy fight. Macellum Advisors also wanted Kohl’s to consider selling itself, or at least spin off its e-commerce unit. The company came out of the battle victorious, having won shareholder approval to keep its current board members in place.
The activist battle resulted from Kohl’s stock underperformance relative to peers such as Walmart and Target. Over the past year, KSS stock has declined 14.8%, including a 1.6% pullback this year to now trade at $48.56 per share. While not great, Kohl’s share price decline is similar to Target’s this year and its stock has outperformed the S&P 500 index. For the first three months of this year, analysts anticipate that Kohl’s will report EPS of $0.72 on revenue of $3.69 billion.
Foot Locker (FL)
Foot Locker (FL) storefront sign in a city
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Sportswear and sneaker retailer Foot Locker (NYSE:FL) has had a rough go of it lately. Over the last six months, FL stock has declined nearly 50%, including a YTD loss of 31%. At its current price of $29.69, Foot Locker’s stock is rapidly approaching its 52-week low of $26.36. Unlike other retailers on this list that sell consumer essentials, Foot Locker’s sneakers, sports jerseys and workout clothes are consumer discretionary items, meaning they’re not essential and sales tend to suffer in bad economic times. Right now, with people struggling to put gas in their cars and groceries on the table, it can be difficult to justify buying a new pair of running shoes or a LeBron James jersey.
Foot Locker remains the biggest footwear retailer in the world with 2,900 stores worldwide spanning multiple brands, such as Lady Foot Locker, Kids Foot Locker, Eastbay, Sidestep and Champs Sports. But sentiment toward the company and its products has soured with consumer prices at a 40-year peak and gasoline prices at their highest level since 2016. Analysts and investors expect slowing growth at Foot Locker. While that might be true, the company continues to pay an attractive quarterly dividend that, at $0.40 per share, is back to where it was before the pandemic. Additionally, Foot Locker has approved a $1.2 billion share buyback program, which is significant considering the company’s market capitalization is currently $2.85 billion.
For Q1, analysts forecast that Foot Locker will report EPS of $1.51 on revenues of $2.21 billion.
Stocks Reporting Earnings: Deere & Company (DE)
John Deere logo on a sign. John Deere is owned by Deere & Company, or DE stock.
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Like Walmart, Deere & Company (NYSE:DE) is the rarest of stock that is actually up this year. So far in 2022, DE stock has gained 7% to trade at $366.90 per share. That’s no easy feat in the current climate. The Moline, Illinois-based company that specializes in the manufacture of heavy equipment and agriculture machinery is benefitting from a boom in commodity prices and a ramp-up in the North American agriculture sector as the war in Ukraine threatens the supply of wheat, corn and barley. Deere is also expected to be a beneficiary of the $1 trillion U.S. infrastructure bill that was passed last November and aims to renew highways, bridges and roads across the nation.
Analysts have been sharpening their pencils to upgrade DE stock in recent weeks. JPMorgan Chase (NYSE:JPM) has upgraded Deere & Company from “underweight” to “neutral” and raised its price target on the stock to $440 per share from $355 previously. That implies another 22% upside from current levels. Clearly, Wall Street sees Deere benefitting from both infrastructure renewal and a ramp-up in agriculture production in Canada and the U.S. this year to compensate for the crop production that is being lost as Ukraine battles to expel Russia from its land. For Q1, Wall Street expects Deere & Co. to report EPS of $6.71 a share and revenues of $13.1 billion.
On the date of publication, Joel Baglole held a long position in HD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
