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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Mar 1, 2020 at 9:30AM

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Stocks look to rebound after a historically bad week.

Investors just endured a historically bad week on the stock market. Both the Dow Jones Industrial Average (^DJI 2.68%) and the S&P 500 (^GSPC 3.06%) plunged over 11% on fears about the potential economic impact of the spreading coronavirus.

While world health fears might continue churning markets over the coming weeks, investors are due to see some important earnings reports from retail giants Target (TGT 2.46%), Kroger (KR 1.51%), and Costco (COST 1.97%). Let's take a look at the key trends that might send their stocks moving this week.

A couple shopping together.

Image source: Getty Images.

Target's outlook

Thanks to its mid-quarter sales update, plus subsequent earnings reports from rivals like Walmart, investors already have a good idea about what to expect when Target issues its fourth-quarter results on Tuesday. The retailer is highly likely to post comparable-store sales gains of around 1.5%, or less than half the rate that management had predicted just before the start of the holiday shopping season.

Shareholders will still be watching this announcement for concrete signs supporting Target's mid-January explanation that pinned most of the slowdown on seasonal categories like toys and video games.

The best indication that this past quarter's slump was just a temporary speed bump would show up in Target's outlook for 2020, especially as it compares to the roughly 3% sales increase the company likely notched this past year.

We'll also find out on Tuesday whether Target sees profit margins inching up for a second straight year, or if most of its profitability gains will again be directed toward its multi-channel retailing transformation.

Kroger's customer traffic

Kroger's stock has missed most of the stock market rally since early 2019, which means the bar is set low for its earnings report on Thursday. The supermarket giant's last announcement showed a few encouraging signs of progress, but Kroger still trailed its retailing peers in both its e-commerce segment and its core store portfolio. Comps rose 2.9% in the fiscal third quarter, compared to over 3% for Walmart and 4.5% for Target.

Walmart recently credited market share wins in the consumer staples aisles for helping support fourth-quarter growth, which means Kroger might have had trouble reaching its goal of 2% comps for full-year 2019. But investors will be even more interested in the outlook that management issues for 2020.

Shareholders are hoping to hear that sales gains will accelerate this year, even as operating margin ticks higher. Yet Kroger may adjust either, or both, of those forecasts to reflect the latest demand trends this week.

Costco's sales update

Costco will announce its second quarter results on Thursday, and all signs are pointing to another strong report from the warehouse retailing leader.

Its sales update in January showed comparable-sales growth of over 6% during the time period that included the holiday shopping peak. We'll find out this week whether that spike included an acceleration in Costco's market-leading customer traffic figure. The chain will also announce critical operating metrics like membership income and subscriber renewal rates, both of which have been trending higher in recent quarters.

Investors might zero in on Costco's international business in light of the coronavirus outbreak. The chain only has one store in China right now but has big plans to build up its infrastructure in that key market over the next few years.

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Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$484.37 (1.97%) $9.37
Target Corporation Stock Quote
Target Corporation
TGT
$150.42 (2.46%) $3.61
The Kroger Co. Stock Quote
The Kroger Co.
KR
$48.45 (1.51%) $0.72
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,500.68 (2.68%) $823.32
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,911.74 (3.06%) $116.01

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

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