Stocks rose last week, as both the Dow Jones Industrial Average (^DJI 0.04%) and the S&P 500 (^GSPC -0.09%) gained over 1%. Heading into the final month of 2020, stock markets are up significantly and sitting at all-time highs.
A few widely owned stocks will announce operating results over the next few trading days, including Stitch Fix (SFIX 3.85%), lululemon athletica (LULU 2.48%), and GameStop (GME 20.46%). Below we'll take a look at the key trends that might send their stocks moving this week.
Stitch Fix's outlook
Investors have some big questions heading into Stitch Fix's Monday report. While the online apparel seller's business snapped right back to growth in the most recent quarter, the wider clothing industry shrank. CEO Katrina Lake back in September noted a few other challenges to the short-term outlook, including a demand shift toward athleisure products and pressure from its earlier pause in marketing spending during COVID-19 retailing shutdowns.
We'll find out on Monday whether Stitch Fix is overcoming those issues and enjoyed a strong start to fiscal 2021. Most investors are expecting sales gains to slow slightly to around 9% compared last quarter's 11% increase.
A weak holiday season outlook from Lake and her team, meanwhile, might convince investors to step back from the stock following its sharp rally over the last few months.
Lululemon reports its results on Thursday, and expectations are running high for the announcement. The athletic apparel specialist notched a quick return to sales growth in the prior quarter following COVID-19 shutdowns in the sprint. This week's report should show more progress along that score, with most investors expecting to see sales gains speed up to about 9% compared to 2% in Q2.
The chain avoided inventory writedowns during the pandemic's worst month, in part by assuming that demand would speed back up. We'll find out this week if that was a smart move. Struggles with inflated inventory would show up in weak gross profit margins or in a one-time inventory writedown charge.
Looking ahead, there are good reasons to expect a bullish holiday outlook from the management team. Sure, customer traffic might stay pressured by social distancing efforts. But the yoga apparel specialist has already demonstrated that it can serve most of its demand through its online sales platform. That channel will be a valuable asset for expanding market share in Q4.
GameStop's business has been shrinking for years and its most recent earnings report provided mostly bad news for investors. Yet shares are surging heading into the retailer's Q3 report on Tuesday. That apparent conflict will be settled in one direction or the other this week.
On the bright side, GameStop's finances are likely to continue improving. Cost cutting, store closures, and a slimming inventory profile all combined to push cash flow higher last quarter and these trends likely continued over the last few months. Executives already put some of those resources to work by paying down debt in late November.
GameStop is likely to have positive things to say about surging interest in the video game niche as consumers respond to a flood of new software releases that coincides with the industry's next-gen console transition.
That excitement might produce an unusually strong holiday quarter for the business. However, given its shrinking store base and the consumer shift toward digital gaming, it's not clear whether GameStop can ever recapture anything approaching its record annual revenue of around $10 billion. Investors will want some confidence that this bigger-picture decline is reversing itself before buying into this retailer's stock.