Investors will return for the last week of November stuffed on Turkey and college football playoff turmoil. Awaiting them is a market that absolutely refuses to quit, with the major indices finishing off Black Friday by notching fresh all-time highs yet again.
Will those gains persist? That largely will be on the shoulders of retailers.
This week, expect to be bombarded with a host of Black Friday and Cyber Monday statistics. But you should also keep an eye out for the earnings calendar, which is also heavy on retail and runs the gamut, from luxury jewelry to dollar stores.
[See: 7 of the Best Stocks to Buy for 2017.]
Tiffany & Co. (TIF). A lousy start to the year for Tiffany has been erased and then some. However, while a 30 percent run since June has TIF shares up about 2 percent in 2016, this stock’s ability to keep marching higher is in limbo as Tiffany heads into Tuesday morning’s third-quarter earnings report.
Expectations for the luxury retailer are shrug-worthy, with Wall Street expecting a 1 percent decline in revenues to $926.6 million and a 4 percent earnings drop to 67 cents per share. Those are easy hurdles to clear, and Deutsche Bank analyst Francesca Di Pasquantonio sees TIF getting past both figures, thanks in large part to strength in U.K. and China operations.
Di Pasquantonio also says in her Nov. 21 note she likes Tiffany’s prospects for the all-important fourth quarter, pointing to, among other things, “new product flow, brand and marketing initiatives” and said “the continued efforts on productivity and efficiencies are starting to pay out.”
But one potential hurdle that investors might get more information on is the effect of post-election protesting at Trump Tower. Some fear this will crimp sales at Tiffany’s neighboring high-traffic flagship store, which makes up around 8 percent of the company’s sales, and where TIF already canceled its holiday window unveiling event.
Ambarella (AMBA). The chip supplier that popped 150 percent in 2015 before being wrenched back down to earth has had a relatively tamer 2016, up 14 percent to beat the market. It can add to those gains on Wednesday after the bell by beating back a few worries from the Street.
Motley Fool’s Steve Symington pinpoints a crucial issue dealing with GoPro ( GPRO), which often is linked closely with Ambarella because of the once-high portion of AMBA’s revenues that the action camera represented.
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“To blame, according to GoPro CEO Nick Woodman, were ‘production issues that resulted in lower-than-expected launch volumes’ for both its new HERO5 Black camera and Karma drone — two products in which Ambarella’s chips have presumably found a home,” he wrote. Moreover, GoPro also was hounded by the recall of its recently launched Karma.
But a point of optimism? The Street is keeping its senses, remembering that Ambarella has diversified and made GoPro a smaller percentage of its business, and not punishing AMBA in the wake of GPRO’s recent report.
AMBA is expected to produce a modest 5 percent gain in revenues but shed about 12 percent in earnings to 95 cents per share. Strength in wearables would likely lead Ambarella over those humps.
Dollar General Corp. (DG). Dollar General already enjoyed a substantial pop on the back of rival Dollar Tree’s ( DLTR) beat-and-raise quarter, and before that, DG shares were among those that got a swift lift following Trump’s election. Dollar General enjoyed another tailwind of late, too — the blockage of rules on overtime pay that should help the dollar store keep workforce costs down.
The question now is whether DG’s third quarter will pack enough of a punch to merit a bump all its own come Wednesday morning.
For the record, DG earnings are expected to climb just less than 6 percent to 93 cents per share on 6 percent revenue growth to $5.37 billion. What will make or break estimates is likely “action plans” that Dollar General said it would put in place to rein in costs and drive comparable-store sales after a disappointing second quarter.
DG is seen by some analysts — including MKM Partners — as being particularly resilient all by itself in an already resilient niche of the retail industry.
However, a nearly 20 percent bump in nearly a month puts Dollar General in a precarious position. Anything other than a substantial beat will likely be met by indifference or even a little profit taking.
Ulta Salon, Cosmetics & Fragrance (ULTA). Ulta looks like a fairly straightforward proposition heading into its Wednesday evening earnings report: Show more of the same, and get more of the same.
ULTA is up 45 percent for the year and has ripped off more than 300 percent in gains over the past five years. That’s a fair result given the company’s long-standing streak of not just growing earnings, but beating Wall Street’s lofty expectations.
For the current quarter, analysts expect roughly 22 percent revenue growth to $1.11 billion on a 23 percent earnings bump to $1.37 per share. ULTA itself is expecting comps of 14 to 15 percent, which would outdo the year-ago quarter’s 12.8 percent improvement.
The chain is simply exploding, and ULTA, which currently has about 900 locations, recently upgraded its store-count guidance from 1,200 stores by 2019 to a range of 1,300 to 1,700. It’s a glaring (and glowing) divergence from much of the rest of the retail industry, which is tripping over itself to close locations and save on costs.
CEO Mary Dillon says she expects the company’s market share to double over the next few years. Stifel believes the same, though it has given a solid target of 2023.
Kroger Co. (KR). Of course, while Ulta has been rewarded for its consistent growth, Kroger has been overlooked. While the giant grocery chain has put together its own impressive string of growth and beats, it has bled out nearly 20 percent in 2016.
Kroger’s issue? The growth simply hasn’t been good enough despite trouncing Wall Street estimates, nor has the direction, as earnings and sales growth have both slowed. Second-quarter comps growth of just 1.7 percent was a six-year low, also contributing to the lack of enthusiasm around Kroger.
However, one issue that has held Kroger back — a deflationary environment — could be on its way out with the election of Trump, who has been vocally pro-inflation. Should his policies on this front pan out, that should drive up consumer prices, which would help Kroger’s profitability.
[See: 13 Ways to Take the Emotions Out of Investing.]
In the here and now, though, the selling has pared back Kroger’s valuation to less than 15 times forward estimates, which could help spur some buying — especially on a beat Wednesday morning that includes better-than-expected same-store sales.
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5 Stocks to Watch This Week AMBA DG KR TIF ULTA originally appeared on usnews.com
