Get Ready For Third Quarter Earnings From The Retail Sector

The third quarter earnings season is nearly finished, but one major group has yet to weigh in. That’s the retailers, and we’ll be hearing from the sector in the coming week, beginning Tuesday when Kohl’s, Home Depot, and TJX Group all report. Later in the week we’ll also hear from Macy’s, Lowe’s, Nordstrom, Target, and Costco.

The group is one of the largest components of U.S. domestic growth, but the specter of rising tariffs, and recent weakness in consumer spending data could be warning of a difficult holiday season to come. So far this year stock returns from the group have run the gamut, from a 70% increase for Target, to a nearly 50% decline for Macy’s.

Last month saw retail sales rise just 0.3%, which has caused some worries over the health of the U.S. consumer and consumer spending. Declines in clothing, furniture, and electronics all contributed to the softness in consumer spending. There were also downward revisions to September and August, which means third quarter results from retailers might not be as strong as expected previously.

One positive heading into the spate of retailer earnings is that both Wal-Mart and J.C. Penney reported stronger than expected earnings last week, which could bode well for the rest of the sector.

Of course it’s difficult to account for the full impact of the U.S.-China trade war, which could have impacted earnings for any of the retailers more than anticipated.

Also of note will be individual guidance for the upcoming holiday season. Retailers that give strong earnings and strong guidance could see strong post-earnings rallies.