Downward revisions in full-year outlooks by department stores sent chills through the consumer discretionary sector this week, as middle-class consumers shop less amid decades-high inflation.
The sector, alongside financials, has so far recorded the highest proportion of earnings and revenue misses in this reporting season. Reports next week from big retail names like Best Buy and Lululemon will offer signals on how their diverse customer bases could affect top-line momentum for the rest of the
(Bloomberg) — Downward revisions in full-year outlooks by department stores sent chills through the consumer discretionary sector this week, as middle-class consumers shop less amid decades-high inflation.
The sector, alongside financials, has so far recorded the highest proportion of earnings and revenue misses in this reporting season. Reports next week from big retail names like Best Buy and Lululemon will offer signals on how their diverse customer bases could affect top-line momentum for the rest of the year.
- To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS.
- NOTE: The US Earnings Week Ahead will not appear next Friday, Sept.
2; it will resume the following week.
Earnings highlights to look for next week:
Monday: Pinduoduo (PDD US) is due before market opens. A push to help Chinese agriculture and food merchants reach residents during lockdowns will likely help maintain year-on-year revenue growth for the fiscal second quarter, says Bloomberg Intelligence.
Active buyers and monthly active users — two key customer engagement metrics for the Shanghai-based e-commerce operator — are poised to continue their growth streaks, despite slowing in the past year.
BI analysts also note that management could address questions over reports about its first cross-border expansion in the US market.
Tuesday: Best Buy (BBY US) will report before the bell. Updates to its forecast will take center stage, says Bloomberg Intelligence, after softening consumer demand forced the retailer of electronics and home-office equipment to slash its full-year sales guidance and halt share buybacks last month.
Aggressive promotions are likely to dilute its operating margin for the second quarter, which the company said may shrink to around 4%, its lowest level in at least two years.
- ESG in focus: Best Buy, an authorized service provider for Apple and Samsung devices, may face questions on its earnings call over how the two giants’ self-repair programs could impact its repair business, according to Bloomberg Intelligence ESG analyst Gail Glazerman.
Just this week, Apple expanded the initiative to some MacBooks, providing repair manuals, parts and tools through its Self-Service Repair Store.
- CrowdStrike (CRWD US) is due after market. Better-than-expected results and full-year guidance from cybersecurity peer Palo Alto Networks this week may portend strength in its second-quarter performance, supported by steady customer adds and adoption of new modules like Identity, Cloud and Humio, according to Barclays and Bloomberg Intelligence.
Competitiveness against Microsoft and SentinelOne remains a focal point for the earnings call, though so far the company’s win rate against legacy endpoint security providers remain high, and the sales cycle “likely hasn’t elongated,” BI said.
Investors may also listen for updates on CrowdStrike’s reported acquisition interests — potentially one or more Israeli cybersecurity companies totaling $2 billion as well as speculation it may join Thoma Bravo’s bid for British cybersecurity firm Darktrace.
Wednesday: SentinelOne (S US) will report after market.
As with CrowdStrike, analysts are expecting the company to post record revenue as Barclays said businesses view cybersecurity as “mission-critical” to protect endpoint devices and workloads in a more distributed workforce.
The company boosted full-year revenue guidance to nearly triple-digit growth in June, momentum that could be sustained by M&A as the market is fundamentally strong, Jefferies said.
Thursday: Lululemon (LULU US) is due after market.
The premium athleisure brand continues to see double-digit, albeit slowing, growth in revenue and adjusted earnings, although Jefferies’ Randal Konik sees risks ahead for its international ambitions as it has relatively low brand awareness in Europe and Asia.
More marketing spending and investment may be needed to support growth in the Chinese market, which has suffered a slowdown due to weakening demand and Covid lockdowns, prompting Adidas to cut its full-year guidance.
Despite the recent popularity of its belt bag, Konik said it may not be enough to offset other risks including price markdowns on footwear and apparel due to elevated inventory, which could lead to margin declines.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
