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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos – Oct 3, 2020 at 3:04PM

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Domino's is one of several widely owned stocks set to announce operating results over the next few trading days.

Stocks rose last week, as both the Dow Jones Industrial Average and the S&P 500 gained close to 2%. The uptick pushed the S&P further into positive territory this year, up 4%, while the Dow is still down 3% since the start of 2020.

A few widely followed stocks will announce operating results over the next few trading days, including Domino's Pizza (DPZ -0.14%), Levi Strauss & Co. (LEVI 0.87%), and Costco Wholesale (COST -0.41%). Let's look at the key trends that might send their stocks moving this week.

Domino's market share

Domino's steadily won market share in the 10 years ending 2019, and sales this year have been further supercharged by the COVID-19 pandemic. But investors are still looking for some potential weak spots in Thursday's earnings report.

Five young adults share a pizza.

Image source: Getty Images.

Peers across the restaurant industry are pouring resources into home delivery as consumers avoid crowded dining rooms. Rival Papa John's International has been making an aggressive push for market share too, with sales rising by more than 20% in recent months.

We'll find out this week whether Domino's fended off those challenges and potentially accelerated domestic comp sales growth from its 16% expansion rate in the company's second fiscal quarter, which coincided with the early months of the pandemic from mid-March to mid-June. The chain will also reveal whether its international segment, which hardly grew in the second quarter, kept its 106-quarter expansion streak alive in the third quarter.

Finally, look for CEO Ritch Allison to trumpet Domino's industry-leading cash efficiency metrics, which should help it maintain a large store network even as many other national chains look to cut store locations.

Levi Strauss' inventory

Investors aren't expecting much good news from Levi Strauss on Tuesday. The jeans maker was slammed by retail closures during COVID-19 shutdowns in its second fiscal quarter, with sales and profitability diving. Levi Strauss generated a net loss of $364 million in the three-month period that ended in late May, in part due to the writedown of lots of excess inventory.

There could be more charges ahead to adjust to new realities in the apparel industry. Investors also might see persistently weak revenue into 2021 that pressures the company's earnings power. Look for hints of that softness in management's comments about the upcoming holiday shopping season.

On the bright side, CEO Chip Bergh and his team are using the crisis to dramatically reshape Levi's cost structure and position it better for e-commerce fulfillment. Those changes could help the business long after the COVID-19 threat disappears.

Costco's September sales

It's been only about a week since Costco announced earnings results, but investors are already set for another key update from the warehouse giant this week. Costco will publish its monthly sales report after the market closes on Wednesday, showing whether the retailer maintained its impressive growth momentum.

Adjusted comparable sales rose 14% in the quarter that ended on Aug. 30, which edged past Walmart's most recent results but trailed the Q2 performance of BJ's Wholesale. Expectations are high that Costco can continue attracting plenty of traffic to its stores and its online platform, especially since its membership renewal rate in the U.S. and Canada remains near a record high at 91%.

Wednesday's report won't include subscriber metrics or fresh data about Costco's earnings. But another month of double-digit sales growth will imply further profit gains that the retailer can use to pad its lead in the industry by cutting prices.

Demitri Kalogeropoulos owns shares of Costco Wholesale. The Motley Fool recommends Costco Wholesale and Domino's Pizza. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Domino's Pizza Stock Quote
Domino's Pizza
DPZ
$381.76 (-0.14%) $0.53
Costco Wholesale Stock Quote
Costco Wholesale
COST
$528.74 (-0.41%) $-2.18
Levi Strauss & Co. Stock Quote
Levi Strauss & Co.
LEVI
$16.21 (0.87%) $0.14

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

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