Will the Retail Wreck Continue?

More retailer earnings are expected this week, after a week of underperformance

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More retailer earnings are coming this week, with reports from Costco, Macy’s, Nordstrom, and Best Buy, among others.

Investors will watch the results closely to see if consumers are pulling back on spending as the rate of inflation lingers near 40-year highs. In addition, rising costs for fuel, freight, and labor are expected to weigh on profits. 

Walmart and Target posted weaker-than-expected quarterly earnings, and shares of both companies took a hit. Walmart's (WMT) stock price lost 20% of its value, and Target's (TGT) lost 17%. The S&P Retail Industry Index is down 32% this year, compared with an 18% decline in the S&P 500.

Macy’s has projected strong sales growth in its April quarter, but has warned that its performance from a year ago would be hard to repeat. Macy’s says same-store sales are expected to increase 13%, compared with a 62% gain a year ago. Macy’s (M) shares are down about 34% this year.

Weaker sales of electronics and appliances could hit Best Buy (BBY), which said sales would decline in the first quarter from a year ago. Best Buy reports results on Tuesday. Its stock price is down 29% this year.

Costco reports results on Thursday, and could be a standout, previously reporting a sales increase for its food category for April. However, the company has said weather conditions have hit sales of other categories like patio furniture. Costco (COST) shares are down 26% so far this year.

"This week's retail earnings reports will likely show us the continued separation in the performance of the companies who focus on consumer staples, like Costco, and those that focus on consumer discretionary items, like Best Buy. As U.S. consumers tighten their spending, they have been pulling back on discretionary items like electronics and clothing," stated Caleb Silver, Investopedia's editor-in-chief.

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