Stocks were mixed last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) held near their all-time highs. The Dow is up 16% year to date, and the S&P 500 is looking at a blistering 21% gain through the start of September.
Earnings season brings several more important business updates over the next few days. Let's take a closer look at a few highly anticipated announcements on the way, from Lululemon Athletica (NASDAQ:LULU), Dave & Buster's Entertainment (NASDAQ:PLAY), and Kroger (NYSE:KR).
Lululemon's gross profit
Investors have had good reasons to feel optimistic about Lululemon's stock this year. Sales have been growing at more than a 20% annual rate since 2019 as the pandemic seemed to only boost demand for its brand of athleisure apparel. Yet revenue gains will be just part of the story when the company announces its latest earnings results on Wednesday.
The number I'll be watching is gross profit margin, which recently hit a five-year high of 57% of sales. This figure is being supported by the chain's e-commerce platform and a flood of premium product releases. Success on these scores has management feeling confident about years of expanding margins ahead, which would amplify earnings growth.
The short-term outlook that executives issue this week might sound cautious, especially as new COVID-19 outbreaks threaten to stall the customer traffic surge it enjoyed in the early summer weeks. But this business has a bright future if it can continue to please an expanding customer base with high-performance apparel.
Dave & Buster's traffic
Dave & Buster's announces its results on Thursday, and investors are bracing for some bad news. While the restaurant chain indicated back in June that a return to record sales levels was imminent, that rebound probably hit turbulence with the latest wave of virus cases. Thursday's report will detail exactly how much pressure the entertainment eatery saw as COVID spiked through July and August.
A slower growth rebound isn't worth worrying about, especially if Dave & Buster's continues squeezing more efficiency out of its business so that cash flow and profit margins climb toward record highs. Yet investors might still take a wait-and-see approach to this stock given the major questions around where its growth rate and earnings power will settle once the pandemic threat finally fades away.
Kroger's market share
Kroger's Friday announcement will answer some big questions for shareholders. The biggest is whether the supermarket chain is holding its own in the battle for market share that became more intense during the pandemic. Rival Walmart (NYSE:WMT) said a few weeks ago that its fresh produce section is allowing it to win new customers, with two-year sales gains sitting at roughly 15%. Wall Street will be judging Kroger's performance against that benchmark on Friday.
Meanwhile, the supermarket giant will need to show progress at gaining efficiency in its e-commerce channel. Its digital platform reboot took extra time to get going, which helps explain why Kroger's profitability hasn't yet seen the type of surge that peers like Target and Walmart have enjoyed. A big part of the investing thesis for this stock relies on having that rebound begin to take shape in late 2021 and into 2022.