Investors have good reasons to follow iRobot's (NASDAQ:IRBT) third-quarter report each year. The seasonality of its business tilts most of its revenue toward the weeks around the Christmas holiday, so the announcement preceding the holiday report usually sets the tone for that all-important shopping season. Last October, for example, iRobot raised its 2018 outlook after third-quarter sales jumped 29%.

The third-quarter report also contains important clues about how well iRobot's latest product releases are resonating with consumers and retailers since those introductions are normally rolled out in the second quarter.

A user controls his robotic vacuum with a smartphone.

Image source: Getty Images.

This year's announcement is even more significant, since iRobot's last two reports have contained signs of a sharp growth slowdown that might impact growth and profitability well into 2020. With that bigger picture in mind, let's look at some metrics to watch when iRobot posts earnings results on Tuesday, Oct. 22.

Unit sales

You don't have to squint to see signs of iRobot's slowing growth. Sales volumes are up just 10% over the past six months, compared with double that pace in the year-ago period. The company cited a negative turn for the robotic cleaning device industry while lowering its 2019 outlook back in late July.

Executives pinned most of the blame on surging tariffs for Chinese imports, and that explanation makes sense. The growth slowdown is most pronounced in the U.S., for example. iRobot also noted robust demand for its latest product releases during Amazon's annual Prime Day sale, which suggests consumers are as excited as they've ever been about home-cleaning technology.

Yet competition could be winning share from the Roomba maker, and other negative shifts in the industry might have longer-term effects on its growth. That's why most investors will focus this week on the company's sales pace and whether the headwinds imply a temporary speed bump or a wider slump.

Passing along costs

iRobot has struggled at passing along soaring tariff expenses to consumers. Yes, shoppers paid an average of $296 per device last quarter versus $285 a year ago. But the company is also selling more expensive products like the Roomba s9 vacuum, which retails at over $1,000.

The pricing challenge shows up best in gross profit margin, which last quarter plummeted to 45% of sales from 52%. CEO Colin Angle and his team are cutting costs throughout the business, but their earnings downgrade in July suggested that these initiatives can only have a limited benefit, especially as competition heats up. Tuesday's update on this key metric will show whether the problem has gotten better or worse over the last few months.

Holiday orders

iRobot explained last quarter that retailers were delaying their orders ahead of the holiday season in response to uncertainty around tariff rates. This shift has added more risk to the business even as the broader industry slowed, and those negative dynamics help explain the stock's slump since March.

Any clarity that iRobot can give investors this week over purchasing trends will help, and that should show up in management's updated outlook for full-year 2019. As it stands today, that forecast calls for sales growth to slow to between 10% and 14% compared with over 20% in 2018. That prediction could change significantly on Tuesday to reflect the latest demand trends from major retailers like Amazon.

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