Stocks rose last week, despite news that the economy just endured the worst month of job losses on record. After the government announced that the unemployment rate set a new record high of 14.7%, both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) gained ground on Friday, landing at an over 2% boost for the full week.
Several highly anticipated earnings reports are set to arrive over the next few trading days, including from Under Armour (NYSE:UA) (NYSE:UAA), Macy's (NYSE:M), and JD.com (NASDAQ:JD). Below we'll take a look at the key trends that might send their stocks moving this week.
Under Armour's U.S. sales
Under Armour announces its results on Monday, and investors are bracing for plenty of bad news in that report. Unlike peers such as Nike and lululemon athletica, Under Armour entered the COVID-19 crisis period with weak operating momentum. Sales fell 2% in the core U.S. market in 2019 and increased by just 1% across all geographies last year.
In early February, CEO Patrik Frisk and his team forecast another challenging year ahead, with significant sales decreases in the U.S. offsetting modest gains in international markets. That outlook surely worsened in the weeks that followed, with COVID-19 halting most in-person retailing across North America and Europe.
Look for Under Armour to focus its comments on bringing costs down and preserving cash during this downturn. Key factors in any growth rebound will include its e-commerce sales channel and its product quality. While the company has launched initiatives in both areas in recent months, including by hiring a new product chief, it might be some time before investors see the improvements reflected in faster sales growth and rising profit margins.
JD.com's stock has outperformed the market during the 2020 swoon as investors bet that its business will benefit from rising e-commerce demand. The Chinese tech company will announce its latest results on Friday in a report that could show significant strain from the COVID-19 pandemic.
JD.com posted a scorching 27% sales increase in its last quarterly announcement, but in early March management predicted a slowdown to roughly 10% for the fiscal first quarter, which includes about a month of aggressive social distancing efforts in China. Like Amazon, the online retailer likely saw surging demand from stay-at-home shoppers in recent weeks. But its results will be pressured by the lockdowns that hit the country in February.
Investors will be focused on management's updated outlook this week. Wall Street is predicting sales gains of about 20% for the fiscal second quarter and the wider 2020 year, but CEO Richard Liu and his team might change those predictions to reflect the latest demand trends.
With most malls and department stores across the country still closed, the investor focus around Macy's Friday results will center on the scale of the financial effect on its business. The pressure will be intense.
Executives said in late March that COVID-19 has taken a "heavy toll" on the company since closures began on March 18. The size of the strain is evident from some of the financial moves that management has taken in recent weeks, including suspending the dividend, fully drawing down its credit line, and freezing hiring and most capital spending.
The big question going forward is whether Macy's will continue struggling with poor sales trends even after the retailing industry reopens. Its earnings potential will be threatened by the recessionary conditions that might persist into late 2020 or beyond. Investors betting on a sharp rebound after that might want to wait for more signs of stabilizing sales before buying this stock.