Many Wall Street traders, analysts and investors have made the plunge into their summer hibernations, coinciding with the end of the first-quarter earnings season.
But even with big, blue-chip earnings reports out of the way, a few interesting stories are rising into the spotlight, with retailers on both ends of the boom-or-bust spectrum reporting earnings this week.
Whether you like tight athletic pants, grape jelly or taxes, this week has something for you:
Lululemon Athletica (ticker: LULU): For as badly as retail has been maligned in the past few months, you’d expect momentum retailer Lululemon to be in the dumps. But the yoga pants maker has endured a roller coaster couple of months to remain some 30 percent ahead for the year.
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That includes a double-digit run in the past couple of weeks that could lend itself to some “sell the news” action on anything but a sterling report when it announces earnings before the bell on Wednesday.
Lululemon is expected to report earnings of 31 cents per share — down slightly from the year-ago period’s 34 cents per share. However, revenues are expected to expand briskly, by about 15 percent to $487.69 million. That revenue growth by and large is coming as a result of a huge expansion push that saw LULU increase its store count by 20 percent to 363 last year.
Because of that expectation, LULU’s fate might instead hinge on comps, which the company guided in the mid-single digits for both the current quarter and the fiscal year. Sterne Agee CRT analyst Sam Poser — who has a “buy” rating on Lululemon shares — sees same-store sales coming in at 7.1 percent, and if that happens, it might just do the trick.
Investors also might take a little optimism out of most recent quarterly results by Nike (NKE), Under Armour (UA) and Adidas, all of which jumped by double digits on a constant-currency basis.
Michaels Companies (MIK): Craft chain Michaels Companies is another retailer that’s bucking the broader trend, with MIK stock up nearly 40 percent year-to-date versus a slightly down SPDR S&P Retail exchange-traded fund (XRT) and slightly higher Standard & Poor’s 500 index.
Michaels might have a difficult time keeping the momentum going, however. Wall Street expects Michaels to grow first-quarter profits by more than 9 percent to 35 cents per share on sales growth of 8.3 percent. On the upside, those estimates are optimistic without being exuberant.
But it should be pointed out that this comes amid relatively weak expectations for Michaels itself coming out of its fourth quarter. When the company reported its end-of-year numbers in March, it projected just 2.8 percent to 3.3 percent (constant currency) comps growth and disappointing earnings projections of 34 to 36 cents per share, with the top end missing expectations by 2 cents.
Expectation management might be the key there, though. Michaels has beat in six of its seven reports as a publicly traded company, so come Tuesday morning, the intentionally low bar might just be what MIK needs amid what has been a soft quarter of retail earnings announcements.
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Restoration Hardware Holdings (RH): Restoration Hardware limped out of the gate in 2016 and has been declining ever since, with shares off nearly 60 percent so far this year.
Best illustrating the home good retailer’s struggles was its preliminary earnings warning in late February, in which the company projected weak results of 99 cents per share in profits on $647 million in revenues — well shy of $1.39 per share and $711 million, respectively. (And actual earnings ended up coming in a penny below that.)
Some of Restoration Hardware’s woes have simply been on the expectations front, with investors and analysts wanting more growth than RH has been able to dole out. Still, some frowns can be turned upside down. For instance, CEO Gary Friedman chalked up part of fourth quarter’s difficulties to vendors being too slow to keep up with its new line, which could be worked out by now. And wealthy would-be buyers who were scared off by a volatile January very well might have regained their courage and ponied up for gourd vases and fake tomes during the aggressive bounceback from the February lows.
We’ll find out after the bell on Wednesday.
JM Smucker Co. (SJM): Smucker is the little jam-maker that could. The company’s annual returns have more than doubled the market for the past 15 years, and that trend is continuing in 2016 with fair 6 percent returns.
And if SJM even manages to meet expectations for the first quarter, it will have produced very robust results indeed.
SJM is expected to report a $1.20-per-share profit for its fiscal fourth quarter when it announces results Thursday morning, and that would represent a jump of more than 20 percent. Revenues are expected to grow similarly, to $1.74 billion. (And for the full year, revenues are expected to jump a whopping 36 percent.)
One thing that should drive Smucker’s big year-over-year improvement is its $5.8 billion purchase of pet food company Big Heart Pet Brands last spring. The division has been a major contributor to the company’s top line — as has its coffee division, which enjoys a licensing agreement with Dunkin’ Brands Group (DNKN).
As a note, SJM has been mostly rangebound since February and has been trying to retake the all-time highs it set at the start of April. Thus, a big beat could send SJM through the ceiling and into new highs … but a miss or disappointing guidance could send shares back to the lower part of the range, which sits about 5 percent below current levels.
H&R Block (HRB): You can forgive H&R Block shareholders from being a little jumpy as HRB’s fiscal fourth quarter results near, considering that just about three months ago, a post-earnings reaction lopped off about 20 percent of the stock’s value.
And this is the big one.
H&R Block’s fiscal fourth quarter is expected to bring about earnings of $3.16 per share. That’s important not just because it’s an impressive 17 percent year-over-year jump, but because full-year earnings are expected to come in at $1.67 per share. That’s right — the tax season quarter will make up the entirety of the company’s annual earnings and cover up for the rest of the year’s losses.
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Revenues are actually expected to decline fractionally year-over-year, so an upside surprise could do wonders for shareholders’ confidence. And if H&R Block did see the business lost in the third quarter thanks to “taxpayers filing their returns later in the season,” we might very well get that. HRB reports Thursday after the bell.
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Wall Street This Week: Lululemon, Michaels and Smucker Are in the Spotlight originally appeared on usnews.com
