Stocks rose last week as both the Dow Jones Industrial Average (^DJI -0.98%) and the S&P 500 (^GSPC -0.46%) edged higher after jumping the prior week.
Earnings season speeds up a bit over the coming week, and below we'll look at a few highly anticipated reports on the way. Let's take a closer look at what Lululemon Athletica (LULU -1.26%), Chewy (CHWY 1.92%), and McCormick (MKC -0.38%) might have to say to investors.
1. Lululemon's holiday sales
There are some big questions heading into the holiday season earnings report from Lululemon on Tuesday. The athleisure apparel specialist's last announcement, in early December, showed impressive momentum at the start of the fourth quarter. Sales jumped 30% through late October to beat management's short-term outlook. The company also raised its forecast for the full 2021 year.
Executives changed their tune about a month later, though, after the rise of the omicron variant collided with staffing challenges and supply chain issues to pressure results. Lululemon's new outlook calls for both sales and earnings to land at the low end of their December guidance.
"We started the holiday season in [a] strong position but have since experienced several consequences of the omicron variant," CEO Calvin McDonald said on Jan. 10.
Image source: Getty Images.
This week's report will reveal those exact consequences, which might show up in slower sales gains and declining profit margins. Keep an eye on Lululemon's inventory for signs that supply chain challenges will pressure sales in early 2022.
2. Chewy's market share
Pet product e-commerce retailer Chewy is likely to report strong sales growth in its Tuesday announcement. Most investors are looking for revenue gains to slow a bit to 19%, compared with 24% last quarter. The chain might show worsening profitability because of soaring transportation costs.
A huge portion of Chewy's sales comes from customers who are committed to its automatic shipment program that acts like a subscription service. That setup should help protect the retailer's market share even as people shift back toward in-person shopping as the pandemic threat eases.
On the other hand, staffing challenges are a threat to the business, especially as employees demand higher wages in this tight labor market. Chewy also has to navigate supply chain issues even as it invests more in its shipping platform. Look for executives to cite those necessary investments as they project weaker earnings growth in 2022.
3. McCormick's margins
McCormick announces its latest operating results on Tuesday in a report that will be packed with valuable news for investors. The spice and flavorings giant is kicking off its fiscal 2022 year after having logged a solid 11% revenue spike in 2021, with gains roughly balanced between its consumer segment and its restaurant division.
Management is projecting a modest slowdown ahead, with gains landing at about 5% after accounting for currency exchange swings. That forecast might change slightly on Tuesday to account for sales disruptions in parts of Europe and supply chain challenges in the U.S. market.
But McCormick's long-term outlook is bright thanks to the potential for market-beating growth along with rising profitability as its sales shift toward higher-margin products like hot sauces and condiments. Combine those boosts with a steadily rising dividend, and you've got some good reasons to consider owning this stock even through a tougher retailing environment in 2022.
