The Strategist

Three stocks to watch out this week

11/13/2017 - 14:02

Last week, stocks fell in price, and the indices of Dow Jones Industrial Average and S&P 500 lost slightly less than 0.5%. Nevertheless, they remain near record figures, and have significantly increased in 2017.

Mike Mozart
Mike Mozart
This week, Home Depot, Target and Foot Locker are to report on the results for the third quarter and inform investors about the updated prospects for the holiday season. That's what investors should pay special attention to.

Number of Home Depot’s buyers

Recent operating results of Home Depot show that home improvement and repair shops are in full swing in the US. While other retailers were unsuccessfully trying to achieve at least some growth, Home Depot in August announced the growth in sales by 6%, profit by 14% - due to the increase in the number of visitors to stores. Home Depot’s opponent, Lowe's, seems to be falling behind on this indicator, and the management has developed plans to increase marketing costs and extend shop hours in the hope of recovering some of the lost market share. Lowe's executives say that they are ready to sacrifice profits to achieve this goal. Given the growing competition, investors will follow any changes in the aggressive annual forecast of Home Depot - so far the company has predicted growth in comparable stores by 5.5% and a 13% increase in earnings per share.

Holiday forecast from Target

Target will announce the results of the third quarter on Wednesday, before the market opens. Currently, the retail network cannot boast of sales growth; however, the results of comparable stores in the previous quarter increased by 1.3% - after a decline in the first quarter. In addition, there is an increase in the number of visitors to shops and sales from the company’s website. The head of the company, Brian Cornell, said: "We are pleased with the growth in the number of customers by 2% - the performance is improving both in traditional stores and in digital distribution channels." This week, the most important thing is the forecast for the holiday season. To protect itself from online stores and cheaper competitors, the company decided to strengthen advertising sales support. On Wednesday, investors will find out whether these efforts have given the expected result. According to the latest forecast of Target, the results of comparable stores remained at the same level, and the adjusted profit will be from $ 4.34 to $ 4.54 per share. Nevertheless, even a slight shift in the sales trends in the fourth quarter could significantly affect the results - both in revenue and in profit.

Number of Foot Locker stores

Foot Locker, specializing in sports shoes and clothes, is expected to publish bad news (the report will be released on Friday). The company surprised investors the last time, reporting on a 6-percent drop in sales in comparable stores - Foot Locker’s management explains this by decline in demand and lack of innovative products on the market. The company warns that this dynamic may persist until 2017 in the industry, and reduces the forecast for the remainder of the year by 3-4%. However, there is good news: Foot Locker receives most of its goods from Nike, and this company recently expressed confidence that the US market is returning to growth, in part thanks to the launch of many new products on the market. On the eve of the holidays, Nike, of course, wants to place these products in storefronts of retail stores, including Foot Locker, and this initiative should help support growth of the number of customers. Nevertheless, if you look at the market as a whole, it turns out that today there is a surplus of stocks and stores on it. In this regard, Foot Locker will experience pressure, pushing to close some stores - now their number in the US reaches 3359.


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