The stock market fell sharply at the end of last week, as investors were surprised by the speed with which multiple banks shut their doors. Declines in major market indexes reflected fears that problems could spread, eventually hurting consumer confidence and potentially causing the recession that so many policymakers have sought to avoid. Stock market index futures were up to start the new week, suggesting a rebound, but you can bet that investors will watch carefully for signs of any further troubles.
Two financial reports due out later this week could have a lot to say about the strength of the consumer economy. FedEx (FDX 1.27%) doesn't serve many consumers directly, but so much of its business comes from businesses shipping goods to their customers that many market participants see the shipping giant's report as a proxy for general consumer economic activity. Meanwhile, Dollar General (DG -0.42%) will also report its latest financial results, and that could show whether consumers are trading down to conserve cash and take advantage of the bargains that dollar-store retailers offer.
Image source: FedEx.
Can FedEx bounce back?
Investors expect FedEx to report its latest quarterly results on Thursday. The package shipping giant's stock has fallen by about a third from its highs almost two years ago, and that decline has some value investors considering FedEx stock along with those who believe that e-commerce will continue to drive demand for its shipping services for years to come.
FedEx has had some challenging quarters in the recent past. The company's fiscal first-quarter financial report in September included surprisingly poor performance from the package shipper, with earnings per share missing consensus forecasts by more than a third. FedEx also suspended its guidance for the remainder of the fiscal year, pointing to softer demand and higher shipping costs that together weighed on the strength of its business.
Yet FedEx has taken steps to try to shore up its business. Restructuring efforts have trimmed the number of flights FedEx runs, saving on operational and maintenance costs in the face of lower demand.
Expectations for FedEx are relatively low, with most investors believing that earnings could take a 40% hit year over year with revenue falling modestly as well. If FedEx can deliver some good news, then it could completely change the downbeat narrative both for the shipping industry as well as for consumer-facing businesses more broadly.
A salute to Dollar General
Dollar General is also likely to report its financial results on Thursday. The dollar-store retail stock has held up much better than some of its peers, but since topping out in October 2022, the stock has lost more than 15% of its value.
Dollar General already gave investors an idea of what to expect from its fiscal fourth-quarter financial report, with preliminary results that showed slower same-store sales growth than the retailer had previously expected. Like many of its retail peers, Dollar General struggled with too much inventory and not enough consumer demand, and it has taken time to remedy the situation and get inventory levels back in line.
Many investors expect to get two key pieces of information from Dollar General's report this week. First, the company should shed some light on the extent to which consumers are trading down from more expensive retailers to take advantage of discounts. Yet conversely, shareholders hope that Dollar General's efforts to upgrade its stores and appeal to more customers through initiatives like adding more groceries to stores will show signs of success.
Already, other retailers have been able to outpace their earnings expectations. To inspire future confidence, Dollar General will have to do the same.
