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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Mar 27, 2021 at 8:00AM

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lululemon athletica is one of several hot stocks set to announce earnings results in the trading week ahead.

A strong finish helped stocks rise last week, as both the Dow Jones Industrial Average (^DJI 0.03%) and the S&P 500 (^GSPC 0.01%) gained over 1%. The boost put indexes back in record territory, having gained over 50% since the pandemic lows set roughly a year ago.

The shorter trading week ahead still features earnings reports from a few of the market's favorite stocks. That list includes lululemon athletica (LULU 1.04%), McCormick (MKC 0.98%), and Dave & Buster's (PLAY -2.52%), whose announcements we'll preview.

A young woman holding a yoga pose.

Image source: Getty Images.

lululemon athletica's inventory

Investors have high expectations for Lululemon's fourth-quarter earnings report on Tuesday. While management initially warned of a COVID-19-related growth slowdown over the holiday period, executives changed their tune in mid-January even as virus outbreaks limited in-store traffic in December. Wall Street pros are now predicting that sales will rise by 19% in this week's report.

We'll find out on Tuesday if the apparel specialist was affected by any of the supply chain and shipping challenges that hurt industry peers such as Nike and Stitch Fix in recent weeks. Nike's sales turned negative over the holidays as inventory stayed stuck in transit to retailers. Stitch Fix noted a similar stumble that produced a surprising growth slowdown.

Lululemon might have avoided the shipping bottleneck in part by paying up for quicker delivery options, such as air freight. That move would show up in lower profitability in Q4. But the chain's outlook should be bright for fiscal 2021, given its strong sales momentum and booming demand in its high-margin digital selling channel.

McCormick's growth outlook

McCormick reports its latest results on Tuesday, in what could be a big week for the stock. The spice and flavorings giant has underperformed the market over the past few months despite solid growth and earnings metrics through most of 2020. But that scenario has primed the stock for a rally if McCormick gets its new fiscal year off on the right foot.

There will be huge growth swings over the next few quarters as the company goes up against a period of extreme demand volatility from a year ago.

But McCormick's latest capital moves, including the acquisition of the Cholula hot sauce franchise and a double-digit dividend increase, imply that management is expecting to grow the business over the next few years while delivering more cash to shareholders. Look for confirmation of that bullish outlook when CEO Lawrence Kurzius updates McCormick's 2021 forecast on Tuesday.

Dave & Buster's rebound strategy

There's a lot riding on Dave & Buster's Wednesday earnings report. The stock has soared in recent months as investors bet on a big growth rebound after widespread COVID-19 vaccinations take hold. The pandemic has had a major impact on the restaurant and entertainment chain's business, with sales down 75% in December.

Investors aren't predicting much better numbers from Dave & Buster's this week. But executives might have some positive comments about demand in recent weeks, as social-distancing shutdowns were relaxed in many of its biggest metropolitan markets.

Still, investors might want to wait before jumping into this stock. The business was struggling before the pandemic, and it will take some time before shareholders will know whether it has a path toward sustainably expanding its store base across the country.

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Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
$274.04 (1.04%) $2.82
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,261.90 (0.03%) $8.77
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,901.36 (0.01%) $0.57
McCormick & Company, Incorporated Stock Quote
McCormick & Company, Incorporated
$90.32 (0.98%) $0.88
NIKE, Inc. Stock Quote
NIKE, Inc.
$108.00 (1.47%) $1.56
Dave & Buster's Entertainment, Inc. Stock Quote
Dave & Buster's Entertainment, Inc.
$34.86 (-2.52%) $0.90
StitchFix Stock Quote
$8.30 (0.85%) $0.07

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

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