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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Jul 5, 2020 at 9:45AM

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Levi Strauss is one of several stocks set to make big moves over the next few trading days.

Last week, stocks moved higher in a shortened trading week, as the Dow Jones Industrial Average (^DJI -0.14%) and S&P 500 (^GSPC -0.20%) gained about 3% and 4%, respectively. Those moves left the Dow down 9% and the S&P down 3% as investors greeted the second half of 2020.

While continued COVID-19 outbreaks and the wider economic picture will capture headlines for the foreseeable future, some major companies are set to announce earnings results over the next few trading days. Let's look at the developments that might send shares of Bed Bath & Beyond (BBBY -8.58%), Levi Strauss (LEVI), and PriceSmart (PSMT -0.87%) moving this week.

A couple shopping together in a mall.

Image source: Getty Images.

Levi's inventory charges

Investors are bracing for rough operating numbers from Levi Strauss in its quarterly results on Tuesday afternoon. The apparel specialist's stores were closed for much of the fiscal 2020 second quarter, and its sales are likely to have fallen more than 50%. Analysts are expecting losses of $0.41 per share compared with a profit of $0.17 per share in the prior-year period.

Investors might look past those painful results if they can see evidence of a robust rebound in the works. That recovery would show up in Levi's inventory levels and in management's comments about how the brand has performed in places like China as stores reopened there in March and April.

Look for CEO Chip Bergh and his team to give an update on the company's balance sheet following an unusually stressful time for its finances. But key risks around economic growth rates and the path of COVID-19 might keep management from issuing any detailed outlook for the second half of 2020.

Bed Bath & Beyond's digital business

Bed Bath & Beyond was struggling before the pandemic forced the temporary closure of most of its stores, and that situation sets up a tough earnings report on Wednesday. The specialty retailer should announce slumping revenue and ballooning net losses, in part due to the writedown of obsolete inventory.

On the bright side, the chain is in the home furnishings industry, which has seen intense new interest lately from consumers looking to upgrade their homes. Industry peers like Home Depot and Target have noted that strength in recent weeks as a key growth avenue. Bed Bath & Beyond should have positive things to say, too, although it was more constrained due to its status as a nonessential retailer.

Investors will hear a lot about the company's shift toward multichannel retailing that hit a higher gear during the pandemic. Bed Bath & Beyond quickly added curbside fulfillment in many markets and has decided to keep those services running even after reopening stores. We'll find out this week whether that helped it satisfy surging demand for products like coffee machines and air purifiers in March, April, and May.

PriceSmart's membership income

International warehouse club PriceSmart will announce its results on Friday, and investors are cautiously optimistic about this report. While comparable-store sales declined in each of the last two months, the pace of the slump lessened in May. This week, CEO Sherry Bahrambeygui might have further positive momentum to announce for the month of June.

Looking further out, shareholders are excited about the potential for new clubs to meaningfully add to PriceSmart's sales footprint. The chain just launched its eighth location in Costa Rica, and a new location in Colombia will soon become its 47th warehouse in operation.

The best metrics to watch for long-term growth trends are membership renewal rates and fee income, since those illustrate how valuable the chain's service is to shoppers across Latin America and the Caribbean. Its short-term results are often more dependent on the changing economic conditions in places like Panama, Honduras, and the U.S. Virgin Islands.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PriceSmart Stock Quote
$60.12 (-0.87%) $0.53
Bed Bath & Beyond Stock Quote
Bed Bath & Beyond
$5.97 (-8.58%) $0.56
Levi Strauss & Co. Stock Quote
Levi Strauss & Co.
$16.58 (%)
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$30,273.87 (-0.14%) $-42.45
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,783.28 (-0.20%) $-7.65
Target Stock Quote
$156.41 (-0.35%) $0.55
Home Depot Stock Quote
Home Depot
$289.85 (0.10%) $0.29

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

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