Stocks ventured further into record territory last week, with both the S&P 500 (^GSPC 1.45%) and the Dow Jones Industrial Average (^DJI 2.12%) gaining roughly 1%. With just a few weeks left in the year, investors are looking at robust 2019 gains of 20% for the Dow and 24% for the S&P 500.
Consumers appear eager to spend as the U.S. economy enters the crucial holiday shopping season, but optimism will be tested in the week ahead as more retailers announce third-quarter results and issue updates to their full-year forecasts. Below, we'll look at the earnings reports that could send shares of Home Depot (HD 2.62%), Target (TGT 1.57%), and Foot Locker (FL 4.44%) moving over the next few trading days.
Home Depot's traffic
Investors are keenly interested in Home Depot's announcement on Tuesday because its last report contained some warning signs on growth, including slowing sales gains and a rare profitability decline. CEO Craig Menear and his team said those issues were mainly driven by temporary challenges like lumber prices, but this week's report will clarify whether management was right to confirm its bullish 2019 outlook.
Investors will be watching comparable-store sales gains this week in hopes of seeing a good balance between rising customer traffic and increased spending. They'll likely stack that number right up against peer Lowe's (NYSE: LOW), which reports on Wednesday, to gauge whether Home Depot is still gaining market share. Finally, Home Depot's comments about the strength of the consumer and the wider industry might determine whether the stock continues rallying into the close of 2019.
Target's holiday outlook
Investor enthusiasm is spiking for Target ahead of its Wednesday report thanks to a string of positive announcements in 2019. The consumer staple stock's most recent quarterly announcement was full of good news, including record sales growth and surging customer traffic. There's no question about where this growth is coming from, either. According to the management team, it's all about ultra-fast and convenient home delivery and in-store pickup options. Those channels contributed roughly one-third of Target's head-turning growth in Q2.
Same-day delivery offerings will likely again play the biggest role in Target's gains for the third quarter, and we'll find out this week whether customers are still eager to pay a bit more for the convenience. Shareholders will be even more interested in what CEO Brian Cornell has to say about the selling landscape heading into the industry's busiest and most competitive period.
Foot Locker's growth trends
Foot Locker expressed optimism following a difficult second quarter, but investors haven't followed that lead. Shares are down about 13% so far in 2019, compared with a 23% spike in the wider market.
Its latest operating trends landed somewhere between strong and weak. Sales at existing locations inched higher by 1% to mark a sharp slowdown from 5% in the prior quarter and 10% in late 2018. Yet profitability held up well and sales gains sped up late in the quarter to generate positive momentum into the key back-to-school season.
We'll learn this week whether Foot Locker was able to capitalize on its slim inventory position to overcome tariff challenges and post solid gross profit margins. Looking further out, investors have big questions about the retailer's wider ambitions as partners like Nike shift their marketing approach toward selling direct to consumers. Assets like Foot Locker's brand and retailing footprint will be valuable in that new environment, but it's not yet clear that the chain can thrive in the multichannel selling ecosystem.