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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Updated Dec 11, 2017 at 8:16AM

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Look for Costco, Pier 1 Imports, and Casey's General Stores to make big moves over the next few trading days.

Stocks ticked higher last week as investors digested generally positive retailing and economic news ahead of the holiday season shopping surge. Both the Dow Jones Industrial Average (^DJI -0.92%) and the S&P 500 (^GSPC -0.87%) rose by approximately 0.5%, to touch new record highs.

^SPX Chart

^SPX data by YCharts.

A few retailers are set to post earnings announcements over the next few trading days, and that could sent the stocks of Costco (COST 1.36%), Pier 1 Imports (PIRRQ) and Casey's General Stores (CASY -0.76%) moving. Here are a few key trends to look for in these reports.

Casey's General Stores' sales gain

Casey's General Stores, which operates 2,000 convenience stores across the Midwest, will announce its fiscal second-quarter results ahead of the market open on Tuesday. The retailing chain is working to win back shareholders' trust right now, thanks to a fiscal 2017 that was marked by slower sales growth than management had predicted.

The start to the new fiscal year hasn't been much more encouraging. CEO Terry Handley and his executive team in early September lowered their guidance for high-margin prepared food sales to between 4% and 6% from the 5% to 7% range they issued three months prior.

A young woman checking out at a convenience store line.

Image source: Getty Images.

Investors will be watching for further downgrades, either to that forecast, or to Casey's grocery-sales outlook that calls for an uptick of 3% at the midpoint of guidance. If customer traffic continues slowing, meanwhile, the company might have to revisit its aggressive plan to add as many as 120 new stores to its base, up from 70 last year.

Costco's renewal rate

Investors are bulking up on shares of Costco heading into its fiscal first-quarter results due out after the market closes on Thursday. After all, there are reasons to believe the world's second-biggest retailer will have good news to report.

Rival Wal-Mart recently posted a growth acceleration, as comparable-store sales improved to 2.7% from 1.8% in the prior quarter, for example. And Target credited a 1.4% customer-traffic boost for driving faster gains through late October. Rather than shrinking through a period of weak shopper traffic, the industry appears to be growing at a healthy pace.

Meanwhile, Costco's last sales report indicated strong gains through the start of holiday-season shopping. Investors will be anxious to hear the latest update on demand trends, but will likely be even more interested in the warehouse club's membership metrics. Its renewal rate ticked lower last year, and a rebound -- especially in the context of rising monthly fees -- would mean this retailing business is as strong as it has ever been.

Pier 1 Imports' holiday forecast

Pier 1 Imports shareholders have had a rough year. The specialty retailer's management team summed it up well in the blunt assessment they issued after comps expanded by less than 2% in the fiscal second quarter, and gross profit margin fell by more than 1 percentage point. "This level of performance does not reflect our expectations for the business," CEO Alasdair James said.

Pier 1 furniture.

Image source: Pier 1 Imports.

James and his team have been reviewing Pier 1's operations to look for opportunities either to save money through improved sourcing and supply-chain strategies, or to boost sales through more effective marketing and merchandising. Investors should get an update on that review on Wednesday afternoon, in addition to any major strategic shifts that it might have produced.

In the meantime, Pier 1's latest official forecast called for comps to tick down by about 1% in the third quarter to generate earnings of between $0.08 per share and $0.14 per share. Executives' full-year forecast predicts flat comps, but that outlook will likely be adjusted based on how well Pier 1 has performed through the start of the holiday shopping surge.


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Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
$476.24 (1.36%) $6.40
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$30,742.53 (-0.92%) $-286.78
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,785.62 (-0.87%) $-33.21
Pier 1 Imports, Inc. Stock Quote
Pier 1 Imports, Inc.
Casey's General Stores, Inc. Stock Quote
Casey's General Stores, Inc.
$185.04 (-0.76%) $-1.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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