Stocks posted big gains last week as both the S&P 500 (^GSPC 1.45%) and the Dow Jones Industrial Average (^DJI 2.12%) rose by about 5%. The surge put the indexes back in positive territory for the year with just a few weeks left in 2018.
The week ahead includes more reports from retailers who will update investors about their growth trends over the first few days of the holiday shopping season. Below we'll look at the metrics that could send shares of Lululemon (LULU 11.30%), Kroger (KR 2.82%), and Ulta Beauty (ULTA 4.60%) moving in response to those earnings announcements.
Lululemon's holiday outlook
Lululemon announces its fiscal third-quarter results after the market closes on Wednesday. Shares are up sharply heading into this report, although the athletic apparel specialist was knocked down during the recent market turmoil and is sitting well off recent highs today.
The retailer hasn't given investors anything to worry about lately. On the contrary, it blew past management's growth and profit targets in each of its last three earnings reports. Lululemon's latest announcement was highlighted by healthy customer traffic, both online and in stores, and surging profitability. Those gains convinced incoming CEO Calvin McDonald and his team to raise their 2018 outlook for the second straight time as the chain's recent yoga-inspired product releases are resonating with its fitness-focused shoppers. We'll find out on Wednesday whether that impressive operating momentum carried through into the second half of Lululemon's fiscal year.
Ulta Beauty's growth rebound
Investors have a few reasons to expect good news from Ulta Beauty on Thursday. Sure, the spa and beauty products specialist's last report marked its fifth straight quarter of decelerating growth, with comparable-store sales gains slipping to 6.5% from a peak of 17% in early 2017. However, growth picked up in key categories like skin care and boutique prestige cosmetics, which offset much of the slowdown in the broader makeup segment. Ulta Beauty gained market share during the period and did a good job at protecting profitability through a tough selling environment.
Meanwhile, CEO Mary Dillon told investors that a rebound is on the way, with comps expected to rise by between 7% and 8% in the third quarter. Management still sees profitability slipping for the second straight year in 2018, but robust sales gains imply that Ulta Beauty has plenty of room to expand toward its target of between 1,400 and 1,700 locations over time -- up from just 1,100 today.
Kroger's shopper traffic
Kroger has a lot to prove on Thursday. The supermarket chain's last few quarterly outings have disappointed investors as sales gains trailed the pace of rivals including Walmart and Target. In the fiscal second quarter, for example, its 1.6% expansion rate was far from Walmart's 4.5% gain and Target's 6.5% spike. Kroger's profitability fell, too, as it invested aggressively in price cuts and in building out its e-commerce abilities.
Both Target and Walmart recently announced positive, but more moderate, growth for the third quarter, and investors will largely judge Kroger's results by how well they stack up against these peers. Executives said back in September that their many strategic initiatives should soon start showing results in the form of improved market share and healthier cash flow, and now it's time to support those claims with hard numbers. After all, success in these areas will be necessary to remove the sting from the reduced profitability that's coming from Kroger's evolution into a multichannel retailing giant.