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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Sep 21, 2020 at 7:02AM

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Nike is one of several big-name stocks set to announce earnings results over the next few days.

Stocks declined slightly last week, with the Dow Jones Industrial Average (^DJI 0.26%) shedding less than 0.1% and the S&P 500 (^GSPC 0.15%) losing 0.64%. That move put the Dow modestly lower so far in 2020 while the S&P 500 is up slightly.

Earnings season is speeding up over the next few trading days, with highly anticipated reports on the way from Nike (NKE 0.21%), Stitch Fix (SFIX 1.81%), and General Mills (GIS 1.04%). Here we'll look at the key trends that might send these stocks moving this week.

A woman jogging over a bridge.

Image source: Getty Images.

Nike's digital sales

Investors are optimistic about Nike's upcoming earnings report on Tuesday afternoon. Sure, the apparel and footwear giant's last quarterly outing was brutal, with sales falling nearly 40% through May. But that fiscal fourth quarter covered the maximum lockdown weeks of the COVID-19 pandemic, and fiscal 2021 should start off on a much stronger note.

Wall Street is betting that sales declines improve to roughly 15% this week. The market-specific numbers will be key to watch, with Nike likely showing solid growth in China following last quarter's 1% uptick. The U.S. segment probably didn't return to sales gains by the end of the quarter, but management might predict just such a turnaround in its outlook comments.

Beyond that updated forecast, look for CEO John Donahoe and his team to talk about cost cuts aimed at preserving profitability in a dramatically different selling environment. Nike may also announce a few one-time charges that clear out its inventory ahead of a critical holiday shopping season for new merchandise launches.

Stitch Fix's repeat business

COVID-19 challenges clouded the growth picture for Stitch Fix last quarter, but investors are expecting to get more clarity around the digital apparel seller's business on Tuesday. This report covers key economic rebounding weeks in July and August, which helps explain why Wall Street is predicting only a 4% sales decline compared with last quarter's 9% slump. Stitch Fix had been growing at more than a 20% clip before the pandemic.

We'll find out this week if last quarter's drop really was driven mostly by temporary supply chain challenges, or if Stitch Fix instead has some demand and pricing challenges to deal with in a more competitive apparel industry. While that bearish scenario is possible, it's more likely that CEO Katrina Lake and her team find plenty of attractive growth avenues that help put the pandemic slowdown firmly in the rearview mirror.

The best metrics to watch on Tuesday for indications of those strengths include repeat order volume, average order value, and gross profit margin.

General Mills' organic sales

General Mills reports its latest results on Wednesday, and the announcement could be packed with encouraging news. The snack and prepared-foods giant has seen organic growth soar to 16% in recent months because of sweeping consumer behavior changes around COVID-19.

Yes, many of these shifts will reverse themselves as the threat lessens. However, it seems likely that people will be eating more meals, especially breakfast, at home at least through early 2021.

That situation gives General Mills an ideal opportunity to both pad its results in the short term and win over new customers and new demographics over the long term. Fellow consumer staples giant Kroger recently noted that its customers are planning to eat many more meals at home even after COVID-19 has passed. General Mills could be an attractive choice for investors seeking exposure to that positive industry trend.

Demitri Kalogeropoulos owns shares of Nike and Stitch Fix. The Motley Fool owns shares of and recommends Nike and Stitch Fix. The Motley Fool has a disclosure policy.

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